Conference of the Parties and Effective annual rate: Difference between pages

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''Environmental risk management.''
(EAR).  


(COP).
__TOC__


The COP is the supreme decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC).  
1.  


All states that are Parties to the UNFCCC are represented at the COP, at which they review the implementation of the UNFCCC and any other legal instruments that the COP adopts and take decisions necessary to promote its effective implementation.
A quoting convention under which interest at the quoted effective annual rate is calculated and added to the principal annually.  


A key task for the COP is to review the national communications and emission inventories submitted by Parties. Based on this information, the COP assesses the effects of the measures taken by Parties and the progress made in achieving the ultimate objective of the UNFCCC.
EAR is the most usual conventional quotation basis for instruments with maturities of greater than one year.




The COP meets every year, unless the Parties decide otherwise. The first COP meeting was held in Berlin, Germany in March, 1995.  
2.  


The 25th meeting (COP25) was held in Madrid in December 2019.
A conventional measure which usefully expresses the returns on different instruments on a comparable basis.  


The EAR basis of comparison is the ''equivalent'' rate of interest paid and compounded annually, which would give the same all-in rate of return as the instrument under review.


The meeting is sometimes known as the United Nations Climate Change Conference (UNCCC).
For this reason, 'EAR' is sometimes expressed as <u>equivalent</u> annual rate.




== See also ==
* [[Climate change: testing the resilience of corporates’ creditworthiness to natural catastrophes]]
* [[Climate risk]]
* [[COP25]]
* [[COP26]]
* [[Green Climate Fund]]
* [[NDC]]
* [[Paris Agreement]]
* [[Risk management]]
* [[United Nations Framework Convention on Climate Change]]


==Conversion formulae==
====Nominal annual rate to periodic rate====
r = R / n
''Where:''
r = periodic interest rate or yield
R = nominal annual rate
n = number of times the period fits into a conventional year (for example, 360 or 365 days)
====Periodic interest rate or yield to Effective annual rate====
EAR = (1 + r)<sup>n</sup> - 1
''Where:''
EAR = effective annual rate or yield
r = periodic interest rate or yield, as before
n = number of times the interest calculation period fits into a calendar year of 365 days (or 366 days in a leap year)
==Calculating EAR from overnight quotes==
<span style="color:#4B0082">'''Example 1: EAR from overnight quote'''</span>
GBP overnight interest is conventionally quoted on a simple interest basis for a 365-day fixed year.
So GBP overnight interest quoted at R = 5.11% means:
(i)
Interest of:
r = R / n
r = 5.11% / 365
r = 0.014% (= 0.00014) is paid per day.
(ii)
The ''equivalent'' effective annual rate is calculated from (1 + r).
1 + r = 1 + 0.00014 = 1.00014
EAR = (1 + r)<sup>n</sup> - 1
EAR = 1.00014<sup>365</sup> - 1
EAR = '''5.2424%'''.
<span style="color:#4B0082">'''Example 2: EAR from 360-day overnight quote'''</span>
USD short term interest is conventionally quoted on a simple interest basis for a 360-day year.
So USD overnight interest quoted at R = 5.11% means:
(i)
Interest of:
r = R / n
r = 5.11% / 360
r = 0.01419444% (= 0.0001419444) is paid per day.
(ii)
The ''equivalent'' effective annual rate is calculated from (1 + r).
1 + r = 1 + 0.0001419444 = 1.0001419444
EAR = (1 + r)<sup>n</sup> - 1
EAR = 1.0001419444<sup>365</sup> - 1
EAR = '''5.3171%'''.
<span style="color:#4B0082">'''Example 3: EAR in a leap year'''</span>
The strict calculation of the effective annual rate is based on the prevailing calendar year, which is 365 days in a normal year, and 366 days in a leap year.
For the same periodic rate of interest (r), the effective annual rate is greater in a leap year.
For example, where (r) = 0.00014 overnight (as in Example 1).
The number of times (n) that the one-day period fits into the calendar year in a leap year = 366.
EAR = (1 + r)<sup>n</sup> - 1
EAR = 1.00014<sup>366</sup> - 1
EAR = '''5.2572%'''.


==External link==
[https://unfccc.int/ UNFCCC home page]


[[Category:Accounting,_tax_and_regulation]]
== See also ==
[[Category:The_business_context]]
* [[AER]]
[[Category:Identify_and_assess_risks]]
* [[ACT/365 fixed]]
[[Category:Manage_risks]]
* [[Annual effective rate]]
[[Category:Risk_frameworks]]
* [[Annual effective yield]]
[[Category:Risk_reporting]]
* [[Annual percentage rate]]
* [[Calculating effective annual rates]]
* [[Capital market]]
* [[Certificate in Treasury Fundamentals]]
* [[Certificate in Treasury]]
* [[Continuously compounded rate of return]]
* [[Effective annual yield]]
* [[Equivalent Annual Rate]]
* [[Leap year]]
* [[LIBOR]]
* [[Nominal annual rate]]
* [[Periodic discount rate]]
* [[Periodic rate of interest]]
* [[Periodic yield]]
* [[Rate of return]]
* [[Real]]
* [[Return]]
* [[Semi-annual rate]]

Revision as of 06:02, 26 April 2016

(EAR).

1.

A quoting convention under which interest at the quoted effective annual rate is calculated and added to the principal annually.

EAR is the most usual conventional quotation basis for instruments with maturities of greater than one year.


2.

A conventional measure which usefully expresses the returns on different instruments on a comparable basis.

The EAR basis of comparison is the equivalent rate of interest paid and compounded annually, which would give the same all-in rate of return as the instrument under review.

For this reason, 'EAR' is sometimes expressed as equivalent annual rate.


Conversion formulae

Nominal annual rate to periodic rate

r = R / n


Where:

r = periodic interest rate or yield

R = nominal annual rate

n = number of times the period fits into a conventional year (for example, 360 or 365 days)


Periodic interest rate or yield to Effective annual rate

EAR = (1 + r)n - 1


Where:

EAR = effective annual rate or yield

r = periodic interest rate or yield, as before

n = number of times the interest calculation period fits into a calendar year of 365 days (or 366 days in a leap year)


Calculating EAR from overnight quotes

Example 1: EAR from overnight quote

GBP overnight interest is conventionally quoted on a simple interest basis for a 365-day fixed year.

So GBP overnight interest quoted at R = 5.11% means:

(i)

Interest of:

r = R / n

r = 5.11% / 365

r = 0.014% (= 0.00014) is paid per day.


(ii)

The equivalent effective annual rate is calculated from (1 + r).

1 + r = 1 + 0.00014 = 1.00014


EAR = (1 + r)n - 1

EAR = 1.00014365 - 1

EAR = 5.2424%.


Example 2: EAR from 360-day overnight quote

USD short term interest is conventionally quoted on a simple interest basis for a 360-day year.

So USD overnight interest quoted at R = 5.11% means:

(i)

Interest of:

r = R / n

r = 5.11% / 360

r = 0.01419444% (= 0.0001419444) is paid per day.


(ii)

The equivalent effective annual rate is calculated from (1 + r).

1 + r = 1 + 0.0001419444 = 1.0001419444


EAR = (1 + r)n - 1

EAR = 1.0001419444365 - 1

EAR = 5.3171%.


Example 3: EAR in a leap year

The strict calculation of the effective annual rate is based on the prevailing calendar year, which is 365 days in a normal year, and 366 days in a leap year.

For the same periodic rate of interest (r), the effective annual rate is greater in a leap year.

For example, where (r) = 0.00014 overnight (as in Example 1).

The number of times (n) that the one-day period fits into the calendar year in a leap year = 366.

EAR = (1 + r)n - 1

EAR = 1.00014366 - 1

EAR = 5.2572%.


See also

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