What is Fixed Income Interest Rate Risk? Fixed income interest rate risk is the risk of a fixed income asset losing value due to a change in interest rates. Since bonds and interest rates have an inverse relationship, as interest rates rise, the value/price of bonds falls. Interest rate risk can be measured by the…
What are Reinsurance Companies? Reinsurance companies, also known as reinsurers, are companies that provide insurance to insurance companies. In other words, reinsurance companies are companies that receive insurance liabilities from insurance companies. It is important to realize that, similar to any other businesses, insurance companies require protection against risk. Insurance companies manage their risk through…
What are Life and Health (L&H) Insurers? Life and health (L&H) insurers are companies that provide coverage on the risk of life and medical expenses incurred from illness or injuries. Life Insurance Life insurance offers coverage for the risk of loss of life. In other words, life insurance pays out a specified sum of money…
What are Fixed Assets? Fixed assets refer to long-term tangible assets that are used in the operations of a business. They provide long-term financial benefits, have a useful life of more than one year, and are classified as property, plant, and equipment (PP&E) on the balance sheet. Key Characteristics of a Fixed Asset The key…
What are Property and Casualty (P&C) Insurers? Property and casualty (P&C) insurers are companies that provide coverage on assets (e.g., house, car, etc.) and also liability insurance for accidents, injuries, and damage to other people or their belongings. Coverage for Property and Casualty Insurers Outlined in the Canadian Institute of Actuaries, property and casualty insurers…
What are Foreign Exchange Reserves? Foreign exchange reserves refer to foreign assets held by the central bank of a country. Foreign assets comprise assets that are not denominated in the domestic currency of the country. For example, US government bonds held by the Bank of Japan are foreign assets for Japan. For most central banks…
What is a Non-Recourse Loan? A non-recourse loan limits the assets of a borrower that a lender can pursue to recover the loan amount in the event of default. If the borrower defaults on the loan, the lender can only go after the asset(s) that were designated as collateral for the loan. The lender cannot…
What is Incremental Budgeting? Incremental budgeting is a type of a budgeting process that is based on the idea that a new budget can best be developed by making only some marginal changes to the current budget. In other words, with incremental budgeting, the current budget is used as a base to which incremental assumptions…
What is the H-Model? The H-model is a quantitative method of valuing a company’s stock price. The model is very similar to the two-stage dividend discount model. However, it differs in that it attempts to smooth out the growth rate over time, rather than abruptly changing from the high growth period to the stable growth…
What are Metal Royalties and Streams? Metal royalty and streaming companies fund mines in exchange for money or precious metal. Mines often have trouble getting funding through traditional routes, such as banks, because of the high costs and unpredictable revenue associated with the mining industry. This is why they borrow funds from royalty and streaming companies….
