ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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DEFERRED ANNUITY Definition
DEFERRED ANNUITY is an annuity in which the income payments/withdrawals begin at some future date
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NORMAL BALANCE, in accounting, is the side of an account, whether debit or credit, to which increases to the account are recorded.
CONVEXITY is the price change that occurs for a bond not accounted for or predicted by modified dU1"ation. Convexity explains why price change estimates using modified duration increase in error as the yield changes, generally by more than 100 basis points. Bonds with positive (negative) convexity have increased (decreased) duration as interest rates fall (rise). Bonds with positive convexity, such as those with put options, have returns higher than those predicted by duration alone. Mortgage-backed securities and callable bonds generally have negative convexity, which means that the price increase predicted by duration for a steep rate decline is too high.