time horizon

Examples of time horizon in the following topics:

• Risk Adjusting for the Time Horizon

  • In other words, default risk increases as the time horizon lengthens.
  • Since stock investments have more time to overcome potential downturns in value, having a longer time horizon can justify more aggressive investing.
  • However, those with time horizons over five years should consider stocks because of their growth potential.
  • Put simply, as time horizon lengthens a higher percentages of stocks should be added to a portfolio.
  • For an individual, diversifying investments in different time horizons is also important.

• Decision Criteria

  • In addition to the time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations; they are also "reversible" to some extent.
  • Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count.

• Measuring and Protecting against Transaction Exposure

  • Thus, all these strategies would have the same time horizon and thus be comparable.
  • An analyst would need to adjust the time horizon for this strategy, so it matches the time horizons for the other strategies.
  • Strategy 3 set the greatest time horizon at 90 days.
  • Unfortunately, this good strategy has a different time horizon than the previous two strategies.
  • Strategy 4: This strategy addresses the time horizon and has no exchange rate risk or country risk.

• Measuring Country Risk

  • Consequently, the investors want an additional reward for waiting for the longer time.
  • Moreover, investors could adjust the weights and grades to reflect different time horizons.

• Defining Finance

  • Finance is the study of fund management and asset allocation over time.
  • The underlying driver behind all of finance is time.
  • There are two reasons why time is so important to finance:
  • The field of finance, however, embraces time.
  • However, most of the time, this is not the case.

• Multi-Period Investment

  • Multi-period investments require an understanding of compound interest, incorporating the time value of money over time.
  • When investing, the time value of money is a core concept investors simply cannot ignore.
  • The future value is simply the present value applied to the interest rate compounded one time.
  • The variables involved in understanding the time value of money in these investments are:
  • Time value of money requires an understanding of how return rates impact fixed values over time.

• Inputs

  • Time series is a sequence of data points, measured typically at successive time instants and spaced at uniform time intervals.
  • Time series analysis comprises methods for analyzing time series data in order to extract meaningful statistics and other characteristics of the data.
  • Time series are very frequently plotted via line charts.
  • Cross-sectional data differs from time series data also known as longitudinal data, which follows one subject's changes over the course of time.
  • Another variant, panel data (or time-series cross-sectional (TSCS) data), combines both and looks at multiple subjects and how they change over the course of time.

• Time to Maturity

  • "Time to maturity" refers to the length of time before the par value of a bond must be returned to the bondholder.
  • "Time to maturity" refers to the length of time that can elapse before the par value (face value) for a bond must be returned to a bondholder.
  • This time may be as short as a few months, or longer than 50 years.
  • The length of time until a bond's matures is referred to as its term, tenor, or maturity.
  • In general, coupon and par value being equal, a bond with a short time to maturity will trade at a higher value than one with a longer time to maturity.

• Calculating Values for Fractional Time Periods

  • The value of money and the balance of the account may be different when considering fractional time periods.
  • But what happens if we are dealing with fractional time periods?
  • The last time interest was actually paid was at January 1, 2014, but the time-value of money theory clearly suggests that it should be worth more in June than in January.
  • In the case of fractional time periods, the devil is in the details.
  • You can plug in a fractional time period to the appropriate equation to find the FV or PV.

• Managing Float

  • Float is the term used to represent duplicate money present between the time a deposit is made and when the deposit clears the bank.
  • Bank float is the time it takes to clear the funds, from the time they were deposited to the time they were credited to the depositing bank.
  • Customer float is defined as the span of time between the deposit to the time the funds are released for use by the depositor.
  • Another aspect of float time is its use to defraud, commonly known as check kiting.
  • When managing cash disbursements, a company should endeavor to increase the amount of time present in the disbursement cycle.