Mark-to-market Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the

current market price, or for similar assets and liabilities, or based on another objectively assessed "fair" value. 1. A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution's or company's current financial situation. 2. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value. 3. When the net asset value (NAV) of a mutual fund is valued based on the most current market valuation.

Market risk Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. Also referred to as "systematic risk". The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices.

Interest Rate Risk The risk that an investment's value will change due to a change in the absolute level of interest rates. Such changes usually affect securities inversely and can be reduced by diversifying (investing in fixedincome securities with different durations) or hedging (e.g. through an interest rate swap). Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rates. In general, as rates rise, the price of a fixed rate bond will fall, and vice versa. Risk Asset In Banking risk assets are the assets that are subject to change in value, due to changes in market conditions or changes in credit quality at various Repricing Opportunities. Examples are maturing bank CDs and bank lines of credit with a Floating Interest Rate.

'Non-Performing Asset - NPA ' A nonperforming loan is either in default or close to being in default.

A classification used by financial institutions referring to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Also known as non-performing loan. Return On Equity ROE The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder's Equity Return On Assets ROA An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The formula for return on assets is:

Earning Spread Earning Spread or Net interest spread refers to the difference in borrowing and lending rates of financial institutions, such as banks, in nominal terms. The earnings spread measures the effectiveness of the bank's intermediation function of borrowing and lending money, which, of course, is the bank's primary way of generating earnings. It is expressed as interest yield on earning assets (any asset, such as a loan, that generates interest income) minus interest rates paid on borrowed funds.

Purchase fund
A type of fund that is only utilized by issuers to purchase securities when they are trading below the nominal dollar amount assigned to the security by the issuer. A purchase fund is similar to a sinking-fund provision. It can be an advantage to investors if the fund is trading below par value, because the company must pay par to repurchase the bonds.

Insolvency risk The risk that an individual or organization can no longer meet its financial obligations with its lender or lenders as debts become due. Insolvency risk is greater when the individual or firm has little or no cash

flow, or when it manages its assets poorly. Banks assess bankruptcy risk when considering whether to make a loan. It is also called bankruptcy risk.

Market Discipline
Market discipline is a market-based promotion of the transparency and disclosure of the risks associated with a business or entity. This is an obligation on the banks, financial institutions and sovereigns to conduct business while considering the risks to their stakeholders. It works in concert with regulatory systems to increase the safety and soundness of the market.

Contingency Reserve
Contingency reserve is the percentage of total surplus retained, that serves as a reserve to cover unexpected losses as well as to cover the shortfall if the earned surplus in a particular year is not adequate to maintain a companys announced dividend scale for participating policies.