imported>Doug Williamson |
imported>Doug Williamson |
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| '''1.'''
| | The communication of risk and risk management outcomes for the purposes of comparing the results with the policy and the early identification of potential problems. |
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| (DF).
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| The number less than one which we multiply a single future cash flow by, to work out its present value as:
| | ==See also== |
| | * [[Guide to risk management]] |
| | * [[Risk assessment]] |
| | * [[Risk evaluation]] |
| | * [[Risk identification]] |
| | * [[Risk management]] |
| | * [[Risk management reporting]] |
| | * [[Risk policy]] |
| | * [[Risk response]] |
| | * [[Statutory duty]] |
| | * [[Strategic Report]] |
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| PV = DF x future cashflow.
| | [[Category:Financial_risk_management]] |
| | | [[Category:Risk_reporting]] |
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| The periodic discount factor is calculated from the periodic [[yield]] as:
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| DF = (1 + periodic yield)<SUP>-n</SUP>
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| Commonly abbreviated as DF(n,r) ''or'' DF<SUB>n,r</SUB>
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| Where:
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| n = number of periods.
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| r = periodic yield (or periodic cost of capital).
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| <span style="color:#4B0082">'''Example 1: Discount factor calculation'''</span>
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| Periodic yield or cost of capital (r) = 6%.
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| Number of periods in the total time under review (n) = 1.
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| Discount factor = (1 + r)<sup>-n</sup>
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| = 1.06<sup>-1</sup>
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| = 0.9434.
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| The greater the time delay, the smaller the Discount Factor.
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| <span style="color:#4B0082">'''Example 2: Increasing number of periods delay'''</span>
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| Periodic yield or cost of capital = 6%.
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| The number of periods delay increases to 2.
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| Discount factor = (1 + r)<sup>-n</sup>
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| = 1.06<sup>-2</sup>
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| = 0.8890.
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| ''(A smaller figure than the 0.9434 we calculated previously for just one period's delay.)''
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| '''2.'''
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| The yield or cost of capital used for the purpose of calculating Discount Factors, as defined above.
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| For example the 6% rate applied in definition 1. above.
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| == See also ==
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| * [[Annuity factor]]
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| * [[Certificate in Treasury Fundamentals]]
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| * [[Certificate in Treasury]]
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| * [[CertFMM]]
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| * [[Compounding effect]]
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| * [[Compounding factor]]
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| * [[Day count conventions]]
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| * [[Factors]]
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| * [[Present value]]
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