What is a Liquidity Ratio? A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its short-term debt obligations. The metric helps determine if a company can use its current, or liquid, assets to cover its current liabilities. Liquidity ratios focus on short-term financial health, whether a company…
What is Morbidity Rate? The morbidity rate measures the portion of people in a specific geographical location who contracted a particular disease during a specific period of time. It indicates the frequency of the disease appearing in a population. Morbidity refers to the status of being ill or unhealthy. It includes the conditions…
What is a Modified Gross Lease? A modified gross lease is a unique method of property ownership and maintenance, where the landlord and tenant are both responsible for paying operating expenses for a property. The rent is usually requested in a lump sum payment and can include sums of money that are used to pay…
What is Guaranteed Renewable? The term guaranteed renewable is used in the insurance industry and refers to an insurance policy feature that ensures that the policyholder continues to receive coverage as long as the policy’s premiums are paid. In a guaranteed renewable policy, there is, at times, an option where the policyholder is…
EONIA Definition and Purpose The Euro Overnight Index Average (EONIA) was a benchmark rate that reflected the average interest rate at which European banks lent to one another overnight in euros. It was published by the European Central Bank (ECB) and calculated by the European Money Markets Institute (EMMI). EONIA was widely used to value…
What is Model Risk? Model risk is the potential loss an institution may incur as a consequence of decisions that are principally based on the output of internal models as a result of errors in the development, implementation, or use of models. Understanding Model Risk Model risk’s become prominent and of serious concern following the…
What is Economic Forecasting? Economic forecasting is the process used in trying to predict or anticipate future economic conditions by using various economic variables and indicators. Economic forecasting is based on the statistical methods of forecasting, which use variables, their relation to each other, and their relationship to the overall economy. Understanding Economic Forecasting Economic…
What is Economic Capital? Economic capital is a risk measure that is defined in terms of capital. It is essentially the amount of capital that a financial company requires to stay solvent given the riskiness of its assets and operations. Economic capital is usually generated internally by financial companies using estimations and forecasting models. The…
What is the Economic Cycle? The economic cycle is the fluctuating state of an economy from periods of economic expansion and contraction. It is usually measured with the Gross Domestic Product (GDP) of a country or region. Other economic factors, such as employment rates, consumer spending, and interest rates, can also be used to determine the…
What is Economic Equilibrium? Economic equilibrium is a state in a market-based economy in which economic forces – such as supply and demand – are balanced. Economic variables that are in equilibrium are in their natural state assuming no impact of external influences. Understanding Economic Equilibrium Economic equilibrium is the result of opposing economic variables…
