Regression analysis is a form of inferential statistics. It is a measure of the relation between the mean* value of one variable (e.g. output) and corresponding values of other variables (e.g. time and cost). Regression model can help predict sales for a company based on weather, previous sales, GDP growth or other types of conditions.…
In statistics, the correlation coefficient r measures the strength and direction of a linear relationship between two variables on a scatterplot. The value of r is always between +1 and –1. The closer the value of r is to +1, the stronger the linear relationship. For example, suppose the value of Diesel prices are directly…
The Pillar 3 of the Basel frame work aims to promote market discipline through regulatory disclosure requirements. BCBS has set out following five guiding principles for banks’ Pillar 3 disclosures. Principle 1: Disclosures should be clear: The disclosure shall be in a simple language understandable to all the stake holders along with presentation of risk…
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…
‘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…
The term capital reserve is sometimes used for the capital buffers that banks have to establish to meet regulatory requirements which are different from cash reserves that banks to maintain as per Central Bank (RBI) regulations. In general terms, a capital reserve is an account on the balance sheet of a company that can be…
Trial balance is a part of accounting process which is a list of debit and credit balances taken from all the ledger accounts. The trial balance may be prepared on daily or weekly or monthly or at the end of the accounting period to check the arithmetical accuracy in recording and posting .The periodicity of…
Types of accounting errors include ‘Error of principle’,’ Error of Omission in accounting’, ‘Error of commission’, ‘Compensating Error’, ‘Error of original entry’, ‘Complete reversal of entries’. Error of principle in accounting: When correct amount is posted to wrong type of account, such error is called error of principle. Suppose machinery installation charges is debited to…
We may observe that some banks as well as dealers of automobiles and electronic items offer discounted loans to their customers. Discounted loans are the loans that have the interest payment subtracted from the principal before the loan is disbursed. For example, consider a customer pays Rs.100/- in a year for an item costing Rs.95/-.…
(This post elucidates on what is annuity, what is ordinary annuity, how to calculate present and future value of annuity along with formulas for calculation of annuity values) An annuity can be defined as a sequence of equal payments made at equal intervals of time. Equated Monthly Installments (EMIs) of loan repayments, monthly remittance of…