CF and Modified convexity: Difference between pages

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imported>Administrator
(CSV import)
 
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{{
(MC). Broadly speaking, modified convexity measures the curvature of an instrument’s price function, as yields change - from a given starting point - by a small amount.  
|=while companies are liable to Corporation Tax on their 'chargeable gains'.)


== See also ==
More strictly, it is the rate of change of modified duration with respect to yield - at the given starting yield.
* [[Capital gain]]
* [[Corporation Tax]]
* "
}}
1.
Carried Forward.
Referring to the closing balance in an account for a period, carried forward to become the opening balance for the next period.
 
Sometimes written C/f.
 
Also sometimes known as \carried down""
CFC,''Tax''. 
Controlled Foreign Company.
 
== See also ==
* [[Controlled foreign company]]
*
CFD,Contract for Differences.
 
== See also ==
* [[Contract for differences]]
*
CFI,Court of First Instance.
 
== See also ==
* [[Contract for differences]]
*
CFO,Chief Financial Officer.
 
== See also ==
* [[Chief Financial Officer]]
*
CGB,Canadian Government Bonds.
 
== See also ==
* [[Chief Financial Officer]]
*
CGBR,Central Government Borrowing Requirement.
 
 
== See also ==
* [[Chief Financial Officer]]
*
CGO,Central Gilts Office.  Now owned and operated by Euroclear UK & Ireland Ltd (formerly CrestCo).
 
== See also ==
* [[Euroclear]]
*
CGS,Credit Guarantee Scheme.
 
== See also ==
* [[Credit Guarantee Scheme]]
*
CGT,Capital Gains Tax.
 
== See also ==
* [[Capital gains tax]]
*
CH,Clearing House.
 
== See also ==
* [[Clearing house]]
*
CHAPS,Clearing House Automated Payment System.
 
== See also ==
* [[Clearing House Automated Payment System]]
*
Charge,1. ''Law''. 
A mortgage or other security attached to an asset or assets which prevents dealing in those assets without the consent of the secured creditor.
 
2. ''Tax''. 
A charge on income.


3. ''Tax''. 
Modified convexity can be calculated from Convexity as follows:
An amount of tax payable.


4.
'''Modified Convexity = C<sub>MOD</sub> = Convexity / (1+r)<sup>2</sup>'''
Any fee or other amount payable for services or facilities provided.


== See also ==
The estimation of price change for a given small change in yield can then be calculated as follows:
* [[Charge on income]]
* [[Fixed charge]]
* [[Floating charge]]
* [[Security]]
*
Charge on income,''Tax''. 
A recurring liability which income tax law allows as a deduction from the taxpayer's total taxable income.


== See also ==
Price change estimation using Modified Duration (MD) only:
* [[Charge]]
  = - Price x MD x Change in yield
* [[Income Tax]]
* [[Tax relief]]
*
Chargeable accounting period,''UK Corporation tax''.
(CAP).  
An accounting period for which a tax charge is made.


== See also ==
Price change estimation using Modified Convexity (C<sub>MOD</sub>):
* [[Accounting period]]
= - [Price x MD x (Change in yield)] + &frac12; x [Price x C<sub>MOD</sub> x (Change in yield)<sup>2</sup>]
* [[Period of account]]
* [[Short chargeable accounting period]]
*
Chargeable asset,''UK Tax.''
Any asset which is not an exempt asset for UK tax purposes.


== See also ==
Because the value v yield relationship is a curve and not a straight line (values do not change linearly as yields change) the estimate of change in value using only modified duration will generally underestimate the new value (because the curve lies above its tangent). Therefore the modified convexity adjustment is always positive - it always adds to the estimate of the new price whether yields increase or decrease.
* [[Assets]]
*
Chargeable company,''UK Tax.''
A company taxed in the UK on the gains arising on disposals of its world wide assets.


== See also ==
It is also possible to estimate the MD and the C<sub>MOD</sub> from given observations of Price and Yield, by rearranging them to solve for MD and C<sub>MOD</sub> - effectively running the price change estimation formulae in the other direction.
* [[Assets]]
*
Chargeable consideration,''UK Tax''. 
The price paid by the purchaser for determining UK stamp duty land tax.


== See also ==
== See also ==
* [[Stamp duty land tax]]
* [[Convexity]]
*  
* [[Matching]]
Chargeable gain,''UK Corporation tax''.
* [[Modified duration]]
The amount of the realised increase in the value of a capital asse



Revision as of 14:20, 23 October 2012

(MC). Broadly speaking, modified convexity measures the curvature of an instrument’s price function, as yields change - from a given starting point - by a small amount.

More strictly, it is the rate of change of modified duration with respect to yield - at the given starting yield.

Modified convexity can be calculated from Convexity as follows:

Modified Convexity = CMOD = Convexity / (1+r)2

The estimation of price change for a given small change in yield can then be calculated as follows:

Price change estimation using Modified Duration (MD) only:

= - Price x MD x Change in yield

Price change estimation using Modified Convexity (CMOD):

= - [Price x MD x (Change in yield)] + ½ x [Price x CMOD x (Change in yield)2]

Because the value v yield relationship is a curve and not a straight line (values do not change linearly as yields change) the estimate of change in value using only modified duration will generally underestimate the new value (because the curve lies above its tangent). Therefore the modified convexity adjustment is always positive - it always adds to the estimate of the new price whether yields increase or decrease.

It is also possible to estimate the MD and the CMOD from given observations of Price and Yield, by rearranging them to solve for MD and CMOD - effectively running the price change estimation formulae in the other direction.

See also