ED THE KNOCK ON FIELD GUIDE
Every term has a short answer and a deeper one. Search in plain English, then open the technical layer when you want it.
88 definitions shown
The forces that describe production, labor, purchasing power, and the expectations behind them.
How quickly real economic output is expanding.
Growth is the change in inflation-adjusted output. It reflects spending, investment, government activity, and trade.
Growth drives hiring, profits, credit demand, and eventually policy.
Growth can accelerate without inflation when productivity or labor supply improves.
Earnings · Employment · Credit · Unemployment · Inflation · NOI growth
The share of people seeking work who cannot find it.
Unemployment measures unused labor, but it lags the cycle. Companies often slow hiring before layoffs begin.
Labor slack influences wage bargaining, household demand, defaults, and inflation.
Participation changes can move the rate even when hiring barely changes.
Growth · Hiring · Claims · Wages · Consumption · Inflation
How quickly worker pay is increasing.
Wages respond to labor demand, worker availability, productivity, and inflation expectations.
Wages support spending but can sustain service inflation when they outrun productivity.
Productivity gains can support faster wages without the same inflation pressure.
Unemployment · Inflation expectations · Inflation · Margins · Spending
How quickly the general price level is rising.
Inflation can come from demand, scarce supply, wages, housing, commodities, or expectations. Its cause determines what follows.
Inflation changes purchasing power, Fed policy, bond yields, margins, and valuations.
A supply shock can raise inflation while growth weakens.
Wages · Demand · Commodities · Fed Funds · Yields · Real income
The inflation rate people and markets expect ahead.
Expectations influence wages, price setting, and the compensation bondholders demand.
Expectations can turn a temporary price move into a persistent one.
Market measures also contain liquidity and risk premia.
Observed inflation · Policy credibility · Wages · Long yields · Inflation
The tools that influence the price and availability of money across the financial system.
The short-term policy rate targeted by the Federal Reserve.
The Fed steers overnight rates with administered rates and liquidity tools. Markets care even more about the expected path.
It is the main lever for making financial conditions easier or harder.
The Fed controls overnight rates, not the 10Y or asset prices directly.
Inflation · Employment · Expectations · SOFR · 2Y yields · Debt costs · Growth
Central-bank liquidity available to the financial system.
Asset purchases, runoff, reserves, and market plumbing shape how easily cash moves.
Liquidity influences risk appetite, market functioning, and financing availability.
More reserves do not guarantee more lending when borrowers or banks are impaired.
Fed balance sheet · Funding stress · Credit availability · Spreads · Risk appetite
Overnight funding, government yields, and the curve connecting different maturities.
The overnight cost of cash borrowed against Treasuries.
SOFR is based on a large secured funding market and usually tracks the Fed’s rate corridor closely.
A huge amount of floating-rate debt resets from SOFR.
Quarter-end funding pressure can create small temporary gaps.
Fed Funds · Repo conditions · Floating-rate debt cost
The market yield on two-year US government debt.
The 2Y bundles today’s rate with expectations for Fed decisions over the next several years.
It is a fast-moving read on the expected near-term policy path.
A hike can coincide with a falling 2Y if markets expected more.
Fed expectations · Inflation data · Yield curve · Short borrowing rates
The yield investors demand to lend to the US government for ten years.
Think of the 10Y as future short rates, expected inflation, and term premium. Each can move differently.
It anchors mortgages, corporate debt, equity discount rates, and real estate.
The 10Y can fall after a hike when recession or future cuts dominate.
Growth · Inflation expectations · Term premium · Debt costs · Cap rates · Valuations
The gap between short- and long-term Treasury yields.
The curve steepens when long yields rise relative to short yields and inverts when short yields exceed long yields.
Its shape affects bank economics and summarizes how markets see the cycle.
An inverted curve is a warning signal, not a countdown clock.
2Y yield · 10Y yield · Bank incentives · Cycle signals
Rates are only one part of financing. Risk compensation and lender willingness matter too.
The extra yield borrowers pay over government bonds.
Spreads compensate for default loss, liquidity, uncertainty, and risk aversion.
Spreads explain why borrower rates can stay high during a crisis despite Fed cuts.
Treasury rallies can mask severe tightening in all-in borrowing costs.
Growth · Defaults · Liquidity · Cost of debt · Credit availability
The all-in interest cost a borrower pays.
Borrowing cost combines a reference rate with a credit spread, fees, and structure.
It shapes investment, refinancing risk, cash flow, and asset values.
Quoted rates do not matter if lenders will not extend credit.
SOFR · Treasuries · Spreads · Investment · Hiring · Cap rates
How willing lenders are to extend financing.
Availability captures underwriting, leverage, maturities, and lender capacity, not just the stated rate.
A low rate is little help when nobody will lend.
Credit can tighten before reported economic data weakens.
Liquidity · Spreads · Bank health · Growth · Transactions · NOI growth
The forces investors balance when pricing companies and deciding what return to require.
Profits generated by public companies.
Earnings reflect revenue, margins, financing costs, taxes, and operating leverage. Markets price their future path.
Expected earnings are the numerator of equity value.
Stocks can rise during falling current earnings if the recovery outlook improves.
Growth · Wages · Financing cost · Public equities · Hiring
The extra return investors demand to own stocks.
The premium expands with uncertainty and compresses when investors compete to own risk. It is not directly observable.
It can overwhelm both earnings and Treasury-yield moves.
Estimates depend heavily on their earnings and growth assumptions.
Volatility · Liquidity · Credit spreads · Public equities · Capital allocation
The market value of listed companies.
Prices balance future cash flows against discount rates and risk compensation. A rate move can affect every part.
Equities influence wealth, confidence, financing conditions, and corporate decisions.
Rates and stocks can rise together when better growth drives both.
Earnings · Yields · Risk premium · Wealth · Capital raising · Confidence
The connection between building-level income, required returns, financing, and property prices.
Growth in property income after operating expenses.
NOI changes with rent, occupancy, expenses, concessions, and lease rollover.
Strong income growth can offset higher cap rates and protect values.
Reported NOI can lag current leasing conditions.
Growth · Rents · Supply · Expenses · Property values · Credit metrics
A property’s annual NOI divided by its market value.
Cap rates reflect yields, growth, property risk, liquidity, and capital demand. A 5% cap is roughly 20× NOI.
They connect property income to value and compare real estate with other assets.
Cap rates can stay flat while yields rise if income expectations improve.
Treasuries · Debt cost · Risk appetite · Property values · Transactions
The price investors assign to real-estate cash flows.
Value is driven by NOI, expected growth, cap rates, financing, and liquidity. Appraisals often adjust slowly.
Values affect leverage, refinancing, construction, and returns.
Sparse transactions can hide falling executable prices.
NOI growth · Cap rates · Liquidity · Leverage · Construction · Transactions
Regimes change the balance of forces. They are lenses for comparison, not predictions.
Inflation cools without a severe recession or large rise in unemployment.
Demand slows enough to reduce inflation pressure while output, employment, earnings, and credit remain broadly resilient. In Knock On, this regime dampens some policy-to-growth and credit-spread pathways.
The same rate increase can have a milder effect when balance sheets and labor demand remain healthy.
A soft landing does not mean every asset rises or that growth never slows.
Broad economic demand contracts and businesses reduce activity.
Output, employment, earnings, and credit formation weaken together. Safe government yields can fall on expected policy easing while credit spreads widen because default and liquidity risks rise.
Falling Treasury yields can coexist with more expensive or less available private credit.
Lower policy rates do not automatically make financial conditions easy.
Price pressure returns after markets or policymakers expected it to fade.
Realized inflation and inflation expectations reprice upward, increasing the expected policy path and the inflation compensation embedded in longer yields. The surprise relative to prior expectations is central.
An inflation surprise can move policy expectations, bonds, credit, and valuations at once.
A high inflation reading has less immediate market impact when it was already fully expected.
Fear about solvency and market functioning overwhelms normal credit relationships.
Risk premia and credit spreads rise, market liquidity deteriorates, and lenders retreat. Policy easing may lower safe rates without repairing impaired balance sheets or restoring private credit transmission.
A Fed cut can occur alongside falling equities and tighter borrowing conditions.
Cheaper overnight money is not the same as available credit.
Inflation stays high while economic growth weakens.
Adverse supply pressure reduces real output while raising prices. Policymakers face a tradeoff because easing may sustain inflation while tightening may deepen the contraction.
Inflation and unemployment can rise together, reversing the usual demand-driven pattern.
Weak growth does not always produce low inflation.
The economy produces more output from the same amount of labor and capital.
Faster productivity expands supply capacity, supports real wages and earnings, and can contain unit-cost inflation even as growth accelerates. Expected real rates and equity values may rise together.
Better growth does not always create more inflation.
Rising yields and rising equities are not inherently contradictory.
These terms explain how a starting change becomes a conditional result.
The first change you ask the model to follow.
A selected concept receives an initial actual and expected value before the causal graph propagates its effects. It is the source node for the scenario.
It defines where the explanation begins, not where it must end.
A directional scenario input introduced into the economic system.
A signed change in a concept, expressed in that concept’s native unit. Its label describes the actual input direction, not a prediction or a claim that the user caused the outcome. Up to three shocks can be combined in Model Lab before propagation.
A shock can be positive or negative and does not necessarily mean a crisis.
What happened in the scenario.
The full value of the selected change. Slower economic pathways generally respond to the actual move even when markets anticipated it.
What people or markets had already anticipated.
The prior value subtracted from the actual move to calculate surprise. It represents the portion potentially reflected in prices or decisions before the event.
The difference between what happened and what was expected.
Surprise equals actual minus expected. Knock On gives surprise more weight in fast market-facing, policy, and expectations channels.
A large event can contain little new information if it was already anticipated.
A complete set of assumptions being explored together.
The active shocks, regime, time horizon, expectations, and any pathway overrides encoded in a shareable state.
The surrounding economic environment in which a change occurs.
A named set of modifiers that may strengthen, weaken, or reverse particular causal relationships without replacing the underlying graph.
A regime is an assumption for exploration, not a prediction about the economy.
How far after the starting change you are looking.
A cutoff measured in approximate months. Only pathways whose accumulated modeled lags have elapsed are included in the visible result.
The delay before an effect becomes visible.
A pathway-specific arrival time. Lags accumulate as a change passes through multiple relationships.
An absent effect may not be zero. It may simply not have arrived.
A modeled route from one concept to another.
A directed relationship with a sign, sensitivity band, lag, confidence, assumptions, evidence status, and limiting conditions.
A result connected immediately to the starting force.
An order-one contribution produced by traversing one relationship from a source shock to a target concept.
How many connections a change travels before reaching a result.
Order one crosses one edge. Order two passes through one intermediate concept. Order three passes through two. Knock On bounds traversal at three to keep explanations finite and legible.
Whether the model applies upward or downward pressure.
The sign of the net contribution in the target concept’s native unit. Direction is conditional on the scenario and competing pathways.
How large the modeled change is.
The absolute size of net pressure after sensitivities, regime modifiers, pathway overrides, and depth decay are applied.
How strongly one concept responds to another.
A range of target-native units per source-native unit. The engine uses the midpoint for its central illustrative estimate and retains uncertainty around it.
Different pathways pushing the same result in different directions.
Separately preserved contributions that share a target concept. Their signed values are combined only after each route is calculated.
The combined result after all visible pressures are added together.
The signed sum of arrived contributions to one concept at the selected horizon. It is an illustrative conditional estimate, not a forecast.
A band around the model’s central estimate.
An uncertainty interval sized from relationship confidence and disagreement among contributing pathways. It describes model uncertainty, not a formal forecast probability.
How much precision the model assigns to a relationship or result.
A qualitative evidence and uncertainty classification. Confidence widens or narrows the plausible range but does not reduce the central pressure estimate.
High confidence is not the probability that the result will occur.
A reason the usual direction could flip.
A stated circumstance under which the sign of a relationship may change because another mechanism or interpretation dominates.
A circumstance that can make a pathway matter more.
A stated condition supporting a larger transmission effect than the governed baseline typically implies.
A circumstance that can make a pathway matter less.
A stated condition that dampens transmission without necessarily reversing its direction.
The reviewed default version of a relationship.
The version-controlled direction, sensitivity, confidence, lag, evidence, and conditions used by the deterministic engine unless a temporary scenario override applies.
A temporary way to ask what happens if one connection is weaker or stronger.
A bounded scenario-only multiplier applied after the regime modifier. It is serialized in the URL and never rewrites the governed baseline.
The model explains conditional pressure. It does not predict what will happen.
An illustrative estimate follows explicit assumptions through a deterministic structure. A forecast would require a probability distribution over future states, data vintages, and errors that Knock On does not claim to provide.
A precise-looking number is not automatically a prediction.
Finance terms that appear inside the detailed explanations.
One hundredth of one percentage point.
One basis point, or 1 bp, equals 0.01 percentage point. One hundred basis points equal 1 percentage point.
The arithmetic difference between two percentages.
A move from 4% to 5% is an increase of 1 percentage point or 100 basis points, but a 25% relative increase.
An interest rate before adjusting for inflation.
The stated rate paid or received in current dollars. It can be decomposed approximately into a real rate plus expected inflation and relevant premia.
An interest rate after accounting for expected inflation.
The inflation-adjusted return to saving or cost of borrowing. Ex ante real rates commonly use expected rather than realized inflation.
Where markets think the Fed’s policy rate is heading.
The sequence of expected future overnight policy rates embedded in instruments such as Treasury yields, futures, and swaps.
A benchmark used as the starting point for another borrowing rate.
A base rate such as SOFR or a Treasury yield to which a contractual or market credit spread is added.
A benchmark return with minimal assumed default risk.
In US-dollar analysis, Treasury rates are commonly used as practical risk-free benchmarks, though they still contain duration, inflation, and market-price risks.
Extra compensation investors may require to hold a long bond instead of repeatedly owning short bonds.
The component of a long yield not explained by expected future short rates. It reflects duration risk, inflation uncertainty, supply, demand, and model-dependent estimation.
Extra return demanded for accepting uncertainty or loss risk.
Compensation above a reference or risk-free rate for bearing risks such as default, liquidity, volatility, or uncertain cash flows.
The return investors require to value future cash flows today.
The rate used to convert future cash flows into present value. It commonly combines a risk-free rate with one or more risk premia.
What future money is worth today.
The discounted value of expected future cash flows. Higher discount rates generally reduce present value when cash-flow expectations are unchanged.
The possibility that a borrower will not make promised payments.
Expected credit loss depends on both the probability of default and the amount not recovered after default.
The risk that an asset cannot be sold or financed quickly at a reasonable price.
Compensation for uncertain transaction costs, market depth, funding access, and the possibility of forced selling.
A preference for more certain outcomes over uncertain ones.
The additional compensation investors demand per unit of risk. Changes in risk aversion can move asset prices without changing expected cash flows.
Debt whose interest rate resets with a benchmark.
The borrower typically pays a reference rate plus a contractual margin. Floors, caps, reset dates, and hedges can interrupt direct pass-through.
Debt whose stated interest rate does not change during its fixed period.
Existing coupon payments remain fixed, although the debt’s market value and the rate available at refinancing can change.
The extra contractual rate a borrower pays above a reference rate.
A loan-specific spread reflecting credit quality, collateral, structure, lender economics, and market conditions.
The extent to which profits change faster than revenue.
When fixed operating costs are large, a small change in revenue can produce a larger percentage change in operating earnings.
How easy or difficult it is to borrow, invest, and take financial risk.
A broad combination of policy rates, bond yields, spreads, lending standards, liquidity, exchange rates, and asset prices.
The return implied by an asset’s price and payments.
For bonds, yield is the discount rate that equates promised cash flows with the current price, subject to maturity and reinvestment assumptions.
The difference between two rates or yields.
A relative pricing measure, commonly expressed in basis points, that isolates differences in maturity, credit, liquidity, or structure.
A period when shorter Treasury yields exceed longer Treasury yields.
A negative long-minus-short slope, often associated with expected future easing or weaker growth. It is a signal with variable timing, not a countdown.
An inversion does not mechanically cause or precisely date a recession.
The expectations and compensation already reflected in current prices.
The state-contingent beliefs, positioning, risk premia, and liquidity conditions embedded in traded instruments before new information arrives.
These labels separate directional evidence, numerical calibration, and explicit judgment.
Primary evidence supports the direction or mechanism.
Official data, guidance, statements, or central-bank research directly supports the pathway. It does not necessarily estimate Knock On’s numerical sensitivity.
Evidence helps determine the model’s numerical range.
A published estimate, reproducible official-data calculation, or exact unit-consistent identity informs the governed sensitivity band.
The relationship is explicit, but its magnitude has not been empirically calibrated.
The pathway remains reviewable and version controlled, while its sensitivity reflects documented model judgment rather than an identified estimate.
Using evidence to set or check a model value.
A reproducible process that maps observations or published estimates into a sensitivity band with documented units, sample, method, and limits.
A number describing how much one variable responds to another.
A parameter expressed in target units per source unit. Its interpretation depends on identification, sample, transformation, and maintained assumptions.
A label describing what kind of support a pathway has.
Knock On distinguishes observed, calibrated, and editorial-judgment relationships so directional support is not confused with numerical estimation.
The original institution, dataset, statement, or study behind a claim.
A canonical record used to support a pathway’s mechanism, estimate, historical example, or methodological construction.
A past episode that demonstrates how a relationship behaved.
Contextual evidence used to illustrate a mechanism or reversal. One episode does not by itself identify a stable coefficient.
A condition the model needs for an interpretation to hold.
An explicit boundary on the scenario, pathway, measurement, or transformation. Assumptions make conditional claims testable and reviewable.
The approved model value currently used in results.
A version-controlled relationship reviewed together with its evidence, tests, calibration seed, changelog, and stewardship record.
New data used to check the approved model.
A refreshed calibration snapshot stored separately from compiled coefficients. It may reveal drift but cannot silently change scenario results.
A new estimate differs from the approved model value.
A mismatch between a refreshed calibration band and the governed relationship. Drift opens review rather than automatically replacing the baseline.
A human steward must evaluate a possible model change.
A governance state requiring source, methodology, scenario-impact, test, seed, changelog, and approval-record review in one source-controlled change.
Named responsibility for reviewing and approving model relationships.
A version-controlled ownership and approval record that prevents runtime data or interface actions from becoming unreviewed model policy.