Break even point and Matching: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
m (Add headers.)
 
imported>Doug Williamson
m (Add header.)
 
Line 1: Line 1:
(BEP).  
1.  


Arranging that in a portfolio of assets and liabilities the cash flows generated by the assets can be expected to meet the liability payouts either because (1) the assets generate income of the right amount at the right time or (2) because the market values of the assets are linked to (positively correlated with) the market values of the liabilities.


1. ''Cost and management accounting.''


In cost and management accounting, the break even point is the number of units of production at which total contribution is equal to fixed cost.
2.  


In other words this is the level of production at which a producer will neither earn a profit nor incur a loss.
Equalising or approximating the modified duration of assets and liabilities in a portfolio, to manage interest rate risk.




2. ''Market pricing.''
3.  


Break even point also refers to the market price at which a strategy results in neither a profit nor a loss.
Equalising or approximating both the modified duration and the modified convexity of assets and liabilities in a portfolio.




3. ''Strategy choice.''
4. ''Financial reporting''


Break even point can also mean any point - for example an out-turn market price - at which two alternative strategies give the same result.
The Accruals concept in accounting.
 
It is therefore the point of ''indifference'' between two choices or strategies. For example two trading strategies each resulting in the same expected profit.
 
So when the break even point is crossed, the optimum decision or choice will change.
 
 
Also written ''breakeven'' point.




== See also ==
== See also ==
* [[Break-even]]
* [[Accruals concept]]
* [[Contribution]]
* [[Correlation]]
* [[Fixed cost]]
* [[Diversification]]
* [[Margin of safety]]
* [[Immunisation]]
* [[Out-turn]]
* [[Interest rate risk]]
* [[Sensitivity analysis]]
* [[Modified convexity]]
* [[Modified duration]]
* [[Portfolio immunisation]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Manage_risks]]

Revision as of 11:26, 10 September 2020

1.

Arranging that in a portfolio of assets and liabilities the cash flows generated by the assets can be expected to meet the liability payouts either because (1) the assets generate income of the right amount at the right time or (2) because the market values of the assets are linked to (positively correlated with) the market values of the liabilities.


2.

Equalising or approximating the modified duration of assets and liabilities in a portfolio, to manage interest rate risk.


3.

Equalising or approximating both the modified duration and the modified convexity of assets and liabilities in a portfolio.


4. Financial reporting

The Accruals concept in accounting.


See also

Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Break_even_point&oldid=32187’