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Definition of Matching

Matching Image 1

Matching

See accruals accounting.



Related Terms:

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.


Combination matching

Also called horizon matching, a variation of multiperiod immunization and cash
flow matching in which a portfolio is created that is always duration matched and also cash-matched in the
first few years.


Exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exactly equal to cash outflows that are being financed by investment.


Matching concept

The accounting principle that requires the recognition of all costs that are associated with
the generation of the revenue reported in the income statement.


Matching principle

The process of linking recognized revenue to any associated
costs, thereby showing the net impact of all transactions related to the recognition
of revenue.



Matching Principle

An accounting principle that ties expense recognition to revenue recognition,
dictating that efforts, as represented by expenses, are to be matched with accomplishments,
that is, revenue, whenever it is reasonable and practicable to do so.


Symmetric cash matching

An extension of cash flow matching that allows for the short-term borrowing of
funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.


Matching Image 2

Accomodating Policy

A monetary policy of matching wage and price increases with money supply increases so that the real money supply does not fall and push the economy into recession.


Clearing house / Clearinghouse

An adjunct to a futures exchange through which transactions executed its floor are settled by a
process of matching purchases and sales. A clearing organization is also charged with the proper conduct of
delivery procedures and the adequate financing of the entire operation.


Dedicating a portfolio

Related: cash flow matching.


Dedication strategy

Refers to multi-period cash flow matching.


Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


Group Life Insurance

This is a very common form of life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually one year renewable term insurance. The cost of this coverage is based on the average age of everyone in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
Some people rely on this kind of insurance as their primary coverage forgetting that group life insurance is a condition of employment with their employer. The coverage is not portable and cannot be taken with you if you change jobs. If you have a change in health, you may not qualify for new coverage at your new place of employment.
Bank mortgage insurance is also usually group insurance and you can tell this by virtue of the fact that you only receive a certificate of insurance, and not a complete policy. The only form in which bank mortgage insurance is sold is reducing term insurance, matching the declining mortgage balance. The only beneficiary that can be chosen for this kind of insurance is the bank. In both cases, employee benefit plan group insurance and bank mortgage insurance, the coverage is not guaranteed. This means that coverage can be cancelled by the insurance company underwriting that particular plan, if they are experiencing excessive claims.


Stochastic models

Liability-matching models that assume that the liability payments and the asset cash flows
are uncertain. Related: Deterministic models.


Switching

Liquidating an existing position and simultaneously reinstating a position in another futures
contract of the same type. Symmetric cash matching An extension of cash flow matching that allows for the
short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the
cost of funding liabilities.



 

 

 

 

 

 

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