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Definition of Premium Mode
Payment schedule of policy premiums, usually selected by the policy owner (monthly, quarterly, annually).
Yearly amount payable by a client for a policy or component.
Yield curve option-pricing models.
A model for determining the required rate of return on an asset.
A model, such as the Capital Asset Pricing model (CAPM), that determines the required
A benefit that automatically forfeits premium payments.
A method of pricing options or other equity derivatives in
An option pricing model in which the underlying asset can take on only two
The first complete mathematical model for pricing
A model for pricing call options based on arbitrage arguments that uses
An economic theory that describes the relationship between risk and
A model for estimating equilibrium rates of return and values of
Theory of the relationship between risk and return which states that the expected risk
Version of the dividend discount model in which dividends grow at a constant rate.
Also called the Gordon-Shapiro model, an application of the dividend discount
the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control
The percentage by which the conversion price in a convertible security exceeds the
A differential in promised yield that compensates the investor for the risk inherent in
Difference in promised yields between a default-free bond and a riskier bond.
Liability-matching models that assume that the liability payments and the asset cash
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the
dividend discount model
Computation of today’s stock price which states that share value equals the present value of all expected future dividends.
Dividend discount model (DDM)
A model for valuing the common stock of a company, based on the
Dividend growth model
A model wherein dividends are assumed to be at a constant rate in perpetuity.
economic components model
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
Extrapolative statistical models
models that apply a formula to historical data and project results for a
A way of decomposing the factors that influence a security's rate of return into common and
A currency trades at a forward premium when its forward price is higher than its spot price.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
present value of a perpetuity with growth.
A model of stock returns using a market index such as the S&P 500 to represent common or
Internet business model
a model that involves
A premium that remains unchanged throughout the life of a policy
Level Premium Life Insurance
This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.
Forward rate minus expected future short-term interest rate.
log size model
Abrams’ model to calculate discount rates as a function of the logarithm of the value of the firm.
This relationship is sometimes called the single-index model. The market model says that the
market risk premium
Risk premium of market portfolio. Difference between market return and return on risk-free Treasury bills.
A model for selecting an optimum investment portfolio,
Extra average return from investing in longversus short-term Treasury securities.
The process of creating a depiction of reality, such as a graph, picture, or mathematical
Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices
The option price.
percentage of sales models
Planning model in which sales forecasts are the driving variables and most other variables are
Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of
1) Amount paid for a bond above the par value.
This is your payment for the cost of insurance. You may pay annually, semi-annually, quarterly or monthly. The least expensive method is annually. Using any of the other payment modes will cost you more money. For example, paying monthly will cost about 17% more. If you pay annually and terminate your coverage part way through the year, you may not receive a refund for the remaining months to the annual renewal date.
Annual amount payable, by a client, for selected product or service.
A bond that is selling for more than its par value.
Premium (Credit Insurance)
Annual or monthly amounts payable, by a client, for a selected insurance coverage to insure debt obligations to their creditors are protected.
A nonqualified stock option whose option price is set substantially
After premiums have been paid for a number of years, further annual premiums may be paid by the current dividends and the surrender of some of the paid-up additions which have built up in the policy. In effect, the policy can begin to pay for itself. Whether a policy becomes eligible for premium offset, the date on which it becomes eligible and whether it remains eligible once premium offset begins, will all depend on how the dividend scale changes over the years. Since dividends are not guaranteed, premium offset cannot be guaranteed either.
QMDM (quantitative marketability discount model)
model for calculating DLOM for minority interests r the discount rate
The reward for holding the risky market portfolio rather than the risk-free asset. The spread
The additional rate of return required on a risky project
Expected return in excess of risk-free return as compensation for risk.
The difference between the yields of two bonds because of differences in their risk.
The difference between the required rate of return on a riskless asset with the same expected life.
Risk premium approach
The most common approach for tactical asset allocation to determine the relative
Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and
Single factor model
A model of security returns that acknowledges only one common factor.
Single index model
A model of stock returns that decomposes influences on returns into a systematic factor,
Related: market model
Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single
Liability-matching models that assume that the liability payments and the asset cash flows
Tender offer premium
The premium offered above the current market price in a tender offer.
Excess of the yields to maturity on long-term bonds over those of short-term bonds.
Also called time value, the amount by which the option price exceeds its intrinsic value. The
Black's zero-beta version of the capital asset pricing model.
Two-state option pricing model
An option pricing model in which the underlying asset can take on only two
premiums paid for coverage not yet provided.
Value-at-Risk model (VAR)
Procedure for estimating the probability of portfolio losses exceeding some
This term relates to participating whole life insurance and the use of the dividend to reduce or completely eliminate the need for future premiums. In the 1980's life insurance company's profits from investment were exceedingly high compared to historical experience. It became common for a salesperson to show new prospective clients how quickly his or her insurance company's dividends would cover the future cost of future premiums. In some cases more emphasis was put on the value of future dividends than on the fact that future dividends were not guaranteed and could only be projected based on current earnings. Many life insurance buyers have since learned that the dividends they expected in the 80's no longer exist in the 90's and they are continuing to dig into their pockets to pay insurance premiums.
Waiver of Premium
This is an option available to the applicant for life insurance which sets certain conditions under which an insurance policy will be kept in full force by the insurance company without the payment of premiums. Very specifically, a life insured would have to become totally disabled through injury or illness for a period of six months before the benefit kicks in. When it does, the insurance company retroactively pays premiums from the beginning of the disability until the time the insured is able to perform some form of regular activity. 'Totally disabled' is highlited here, because that is what is required to receive this benefit.
Waiver of Premium
A benefit that allows CLA to pay premiums on behalf of the insured.
Yield curve option-pricing models
models that can incorporate different volatility assumptions along the
CARs (cumulative abnormal returns)
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
High-coupon bonds that sell at only at a moderate premium because they are callable at a
In October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life Insurance Companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts.
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