Things to know before buying life and non-life insurance policies

(This post explains various types of insurance policies available in the market like Life Insurance policies, Health insurance policies, Property Insurance policies including plant and machinery, boiler, shipping insurance, stock of goods, etc., and conditions and clauses to be verified by the buyers before buying them). For many average insurance policy buyers verifying conditions and…

WHAT IS AN ESCROW ACCOUNT?

Escrow account is an account placed in trust with a third party usually a bank to hold money which belongs to others. The release of money parked in escrow account will be dependent on conditions agreed to by the transacting parties. The Escrow services are offered to meet diverse requirements of clients that include Sale…

What is Off-Balance Sheet Exposure ?

Off-balance sheet exposures refer to activities that are effectively assets or liabilities of a company but do not appear on the company’s balance sheet. The off-balance sheet exposures in banking activities refers to activities that do not involve loans and deposits but generate fee income to the banks. The non-fund based facilities like Issuance of…

What is modified duration?

Modified duration is a concept that interest rates and bond prices move in opposite directions. It tells you how sensitive a bond is to interest rate changes. It is expressed in a formula that expresses the measurable change in the value of a security in response to a change in interest rates. Key points about…

What is Duration or Macaulay duration?

‘Duration’ or Macaulay duration  measures the price volatility of fixed income securities. As the term suggests, duration is expressed as a number of years and measures a bond’s sensitivity to change in interest rates. Usually, the higher the duration, the more is the volatility in the prices. To be precise, it measures the change in market…

What is a market risk?

The ‘Market risk’ is an umbrella term used for multiple types of risk associated with adverse changes in market variables that include Liquidity Risk, Interest rate risk, Foreign exchange rate risk and equity price risk. Market risk causes substantial changes in income and economic value of banks. The Bank of International Settlements (BIS) defines market risk…