Financial Terms Morbidity Tables

# Definition of Morbidity Tables

## Morbidity Tables

These are statistical tables used by life insurance companies showing the probability of disease of male and females at all ages.

# Related Terms:

## Input-output tables

tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output.

## Mortality tables

tables of probability that individuals of various ages will die within one year.

## Mortality Tables

This is a statistical table used by life insurance companies showing the probability of death of male and females at all ages.

## Full-Employment Output

The level of output produced by the economy when operating at the natural rate of unemployment.

## input-output coefficient

a number (prefaced as a multiplier
to an unknown variable) that indicates the rate at which each
decision variable uses up (or depletes) the scarce resource

## Mortality Rate

The death rates for various age groups of the population.

GDP.

## Output Gap

The difference between full employment output and current output.

## Potential Output or Potential GDP

output produced when the economy is operating at its natural rate of unemployment.

## Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

## Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

## acid test ratio (also called the quick ratio)

The sum of cash, accounts receivable, and short-term marketable
investments (if any) is divided by
total current liabilities to compute this ratio. Suppose that the short-term
creditors were to pounce on a business and not agree to roll over the
debts owed to them by the business. In this rather extreme scenario, the
acid test ratio reveals whether its cash and near-cash assets are enough
to pay its short-term current liabilities. This ratio is an extreme test that
is not likely to be imposed on a business unless it is in financial straits.
This ratio is quite relevant when a business is in a liquidation situation
or bankruptcy proceedings.

## Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.

## All equity rate

The discount rate that reflects only the business risks of a project and abstracts from the
effects of financing.

## All-in cost

Total costs, explicit and implicit.

## All or none

Requirement that none of an order be executed unless all of it can be executed at the specified price.

## All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.

## allocate

assign based on the use of a cost driver, a cost predictor,
or an arbitrary method

## allocation

the systematic assignment of an amount to a recipient
set of categories annuity a series of equal cash flows (either positive or negative) per period

## Allocation

The process of storing costs in one account and shifting them to other
accounts, based on some relevant measure of activity.

## Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and
services.

An offset to the accounts receivable balance, against which
bad debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period bad debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large bad debts to
expense on an infrequent basis.

## Allowance for doubtful accounts

A contra account related to accounts receivable that represents the amounts that the company expects will not be collected.

## Allowance for Doubtful Accounts

An estimate of the uncollectible portion of accounts receivable
that is subtracted from the gross amount of accounts receivable to arrive at the estimated collectible
amount.

## Allowance method

A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.

## Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

## approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs

## Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.

## At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.

## Average life

Also referred to as the weighted-average life (WAL). The average number of years that each
dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal
paydowns.

## Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.

## Base probability of loss

The probability of not achieving a portfolio expected return.

## Base Year

The reference year when constructing a price index. By tradition it is given the value 100.

## Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

## Borrower (Credit Insurance)

A consumer who borrows money from a lender.

## Borrower fallout

In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
closed will elect to withdraw from the contract.

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).

A conditional trading order that indicates a security may be purchased only at the designated
price or lower.
Related: Sell limit order.

Mortgages in which monthly payments consist of principal and interest, with portions of These
payments during the early period of the loan being provided by a third party to reduce the borrower's monthly
payments.

## Call

An option that gives the right to buy the underlying futures contract.

## Call

a. An option to buy a certain quantity of a stock or commodity for a
specified price within a specified time. See Put.
b. A demand to submit bonds to the issuer for redemption before the maturity date.
c. A demand for payment of a debt.
d. A demand for payment due on stock bought on margin.

## Call an option

To exercise a call option.

## Call date

A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
for a specified call price.

## Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.

## Call option

An option contract that gives its holder the right (but not the obligation) to purchase a specified
number of shares of the underlying stock at the given strike price, on or before the expiration date of the
contract.
Premium in price above the par value of a bond or share of preferred stock that must be paid to
holders to redeem the bond or share of preferred stock before its scheduled maturity date.

## Call Option

A contract that gives the holder the right to buy an asset for a
specified price on or before a given expiration (maturity) date

## call option

Right to buy an asset at a specified exercise price on or before the exercise date.

## Call price

The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
specified call date.

## Call price

The price for which a bond can be repaid before maturity under a call provision.

## Call protection

A feature of some callable bonds that establishes an initial period when the bonds may not be
called.

## Call provision

An embedded option granting a bond issuer the right to buy back all or part of the issue prior
to maturity.

## Call risk

The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

## Call swaption

A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
writer therefore becomes the fixed-rate receiver/floating rate payer.

## Callable

A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
call the security.

## Callable bond

A bond that allows the issuer to buy back the bond at a
predetermined price at specified future dates. The bond contains an embedded
call option; i.e., the holder has sold a call option to the issuer. See Puttable
bond.

## callable bond

Bond that may be repurchased by the issuer before maturity at specified call price.

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to \$60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

## Canadian Life and Health Insurance Association (CLHIA)

An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.

## Capital allocation

decision allocation of invested funds between risk-free assets versus the risky portfolio.

## Capital Consumption Allowance

See depreciation.

## Capital Cost Allowance (CCA)

The annual depreciation expense allowed by the Canadian Income Tax Act.

## Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

## Cash Flow Provided or Used from Investing Activities

Cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.

## Child Insurance Rider (CIR)

insurance or insurability provided on current or future children of insured.

## Chinese wall

Communication barrier between financiers (investment bankers) and traders. This barrier is
erected to prevent the sharing of inside information that bankers are likely to have.

## Co-insurance

In medical insurance, the insured person and the insurer sometimes share the cost of services under a policy in a specified ratio, for example 80% by the insurer and 20% by the insured. By this means, the cost of coverage to the insured is reduced.

## Coinsurance effect

Refers to the fact that the merger of two firms decreases the probability of default on
either firm's debt.

## Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

## Common-base-year analysis

The representing of accounting information over multiple years as percentages
of amounts in an initial year.
Common-size analysis The representing of balance sheet items as percentages of assets and of income
statement items as percentages of sales.

## Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

## Component

Raw materials or subassemblies used to make either finished goods
or higher levels of subassembly.

## Constant dollar accounting

A method for restating financial statements by reducing or
increasing reported revenues and expenses by changes in the consumer price index,
thereby achieving greater comparability between accounting periods.

## Constant dollars

See real dollars.

## Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

## cost allocation

the assignment, using some reasonable basis,
of any indirect cost to one or more cost objects

## Cost of Insurance

The cost of insuring a particular individual under the policy. It is based on the amount of coverage, as well as the underwriting class, age, sex and tobacco consumption of that individual.

## cost of production report

a process costing document that
details all operating and cost information, shows the computation
of cost per equivalent unit, and indicates cost assignment
to goods produced during the period

## Covered call

A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

## Covered call writing strategy

A strategy that involves writing a call option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.

## Cramdown

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
some classes of creditors.

## Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.

## Critical Illness Insurance

Coverage that provides a lump-sum payment should you be diagnosed with a critical illness and survive a pre-determined period of time. There are no restrictions on how you use your benefit.

## Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.

## Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

## Crown jewel

A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

## Cumulative probability distribution

A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.

## Current Dollars

A variable like GDP is measured in current dollars if each year's value is measured in prices prevailing during that year. In contrast, when measured in real or constant dollars, each year's value is measured in a base year's prices.

## Day order

An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Also known as "Dead Janitors insurance", this is the practice, where allowed, in several U.S. states, of numerous well known large American Corporations taking out corporate owned life insurance policies on millions of their regular employees, often without the knowledge or consent of those employees. Corporations profiting from the deaths of their employees [and sometimes ex-employees] have attracted adverse publicity because ultimate death benefits are seldom, even partially passed down to surviving families.

## Debt (Credit Insurance)

Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured.

## Deferred call

A provision that prohibits the company from calling the bond before a certain date. During this
period the bond is said to be call protected.

## Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.

## Depreciation Allowances

Tax deductions that businesses can claim when they spend money on investment goods.

## Disability Insurance

insurance that pays you an ongoing income if you become disabled and are unable to pursue employment or business activities. There are limits to how much you can receive based on your pre-disability earnings. Rates will vary based on occupational duties and length of time in a particular industry. This kind of coverage has a waiting period before you can begin collecting benefits, usually 30, 60 or 90 days. The benefit paying period also varies from 2 years to age 65. A short waiting period will cost more that a longer waiting period. As well, a long benefit paying period will cost more than a short benefit paying period.

## Disability Insurance (Credit Insurance)

Group insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.

## Discrete order picking

A picking method requiring the sequential completion of
each order before one begins picking the next order.

## Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
"U.S. dollar" bonds, a common term of reference in the Eurobond market.

## Dollar Cost Averaging

A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.

## dollar days (of inventory)

a measurement of the value of inventory for the time that inventory is held

## Dollar duration

The product of modified duration and the initial price.

## Dollar price of a bond

Percentage of face value at which a bond is quoted.

## Dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market
value of the portfolio and (2) any distributions made from the portfolio during that period.

## Dollar roll

Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
portfolio with purchase of a similar security at a future date at an agreed-upon price.

## Dollar safety margin

The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
strategy.

## Dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the
present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

## Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.

## Dow Jones Industrial Average

Index of the investment performance of a portfolio of 30 “blue-chip” stocks.

## Down-and-in option

Barrier option that comes into existence if asset price hits a barrier.

## Down-and-out option

Barrier option that expires if asset price hits a barrier.