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Macaulay duration is a time measure with units in years and really makes sense only for an instrument with fixed cash flows. For a standard bond, the Macaulay duration will be between 0 and the maturity of the bond. It is equal to the maturity if and only if the bond is a zero-coupon bond.
Immunization can be accomplished by several methods, including cash flow matching, duration matching, and volatility and convexity matching. It can also be accomplished by trading in bond forwards, futures, or options. Other types of financial risks, such as foreign exchange risk or stock market risk, can be immunised using similar strategies.
Duration gap. In Finance, and accounting, and particularly in asset and liability management (ALM), the duration gap is the difference between the duration - i.e. the average maturity - of assets and liabilities held by a financial entity. [1] A related approach is to see the "duration gap" as the difference in the price sensitivity of interest ...
In finance, the weighted-average life (WAL) of an amortizing loan or amortizing bond, also called average life, [1][2][3] is the weighted average of the times of the principal repayments: it's the average time until a dollar of principal is repaid. In a formula, [4] where: is the time (in years) from the calculation date to payment . If desired ...
Frederick Robertson Macaulay (August 12, 1882 – March 1970) was a Canadian economist of the Institutionalist School. He is known for introducing the concept of bond duration . [ 1 ] Macaulay's contributions also include a mammoth empirical study of the time series behavior of interest rates published in 1938 and a study of short selling on ...
Whole life insurance, or whole of life assurance (in the Commonwealth of Nations), sometimes called "straight life" or "ordinary life", is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. [1] As a life insurance policy it represents a ...
Maturity (finance) In finance, maturity or maturity date is the date on which the final payment is due on a loan or other financial instrument, such as a bond or term deposit, at which point the principal (and all remaining interest) is due to be paid. [ 1 ][ 2 ][ 3 ] Most instruments have a fixed maturity date which is a specific date on which ...
An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. Policies are typically traditional with-profits or unit-linked (including ...