What Is Effective Duration? Effective duration is a duration calculation for bonds that have embedded options. This measure of duration takes into account the fact that expected cash flows will fluctuate as interest rates change and is, therefore, a measure of risk. Effective duration can be estimated using modified duration if a bond with embedded
What Is an Economic Indicator? An economic indicator is a piece of economic data, usually of macroeconomic scale, that is used by analysts to interpret current or future investment possibilities. These indicators also help to judge the overall health of an economy. Economic indicators can be anything the investor chooses, but specific pieces of data
What Is Economic Blight? Economic blight is the visible and physical decline of a property, neighborhood, or city due to a combination of economic stagnation, population decline with residents and businesses leaving the area, secular decline in real incomes, and the cost of maintaining the quality of older structures. These factors tend to feed on
What Is the Economic Calendar? The economic calendar refers to the scheduled dates of significant releases or events that may affect the movement of individual security prices or markets as a whole. Investors and traders use the economic calendar to plan trades and portfolio reallocations and to be alert for chart patterns and indicators that
What Is Economic Capital? Economic capital is a measure of risk in terms of capital. More specifically, it’s the amount of capital that a company (usually in financial services) needs to ensure that it stays solvent given its risk profile. Economic capital is calculated internally by the company, sometimes using proprietary models. The resulting number
What Is Economic Collapse? An economic collapse is a breakdown of a national, regional, or territorial economy that typically follows a time of crisis. An economic collapse occurs at the onset of a severe version of an economic contraction, depression, or recession and can last any number of years depending on the severity of the
The economic cycle, also known as a business cycle, refers to fluctuations of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, total employment, and consumer spending can help to determine the current stage of the economic cycle. Understanding the economic cycle can help investors and businesses determine
What Is Economic Depreciation? Economic depreciation is a measure of the decrease in the market value of an asset over time from influential economic factors. This form of depreciation usually pertains to real estate, which can lose value for several reasons such as the addition of unfavorable construction in close proximity to a property, road closures, a decline in the quality of
What Is Economic Equilibrium? Economic equilibrium is a condition or state in which economic forces are balanced. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences. Economic equilibrium is also referred to as market equilibrium. Economic equilibrium is the combination of economic variables (usually price and quantity) toward
What Is Economic Exposure? Economic exposure is a type of foreign exchange exposure caused by the effect of unexpected currency fluctuations on a company’s future cash flows, foreign investments, and earnings. Economic exposure, also known as operating exposure, can have a substantial impact on a company’s market value since it has far-reaching effects and is
