Time horizon

Last updated

A time horizon, also known as a planning horizon, is a fixed point of time in the future at which point certain processes will be evaluated or assumed to end. It is necessary in an accounting, finance or risk management regime to assign such a fixed horizon time so that alternatives can be evaluated for performance over the same period of time. A time horizon is a physical impossibility in the real world.

Finance academic discipline studying businesses and investments

Finance is a field that is concerned with the allocation (investment) of assets and liabilities over space and time, often under conditions of risk or uncertainty. Finance can also be defined as the art of money management. Participants in the market aim to price assets based on their risk level, fundamental value, and their expected rate of return. Finance can be split into three sub-categories: public finance, corporate finance and personal finance.

Risk management Set of measures for the systematic identification, analysis, assessment, monitoring and control of risks

Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

Although short term horizons such as end of day, end of week, end of month matter in accounting, generally it is mere summing-up and the simplest mark to market processes that take place at these short term horizons. No scenario analysis or mark to future activities are usually undertaken for such short periods, except for very large portfolios.

End of day

End of day (EOD), end of business (EOB), close of business (COB), close of play (COP) or end of play (EOP) is the end of the trading day in financial markets, the point when trading ceases. In some markets it is actually defined as the point in time a few minutes prior to the actual cessation of trading, when the regular traders' orders are no longer received.

Scenario analysis

Scenario analysis is a process of analyzing possible future events by considering alternative possible outcomes. Thus, scenario analysis, which is one of the main forms of projection, does not try to show one exact picture of the future. Instead, it presents several alternative future developments. Consequently, a scope of possible future outcomes is observable. Not only are the outcomes observable, also the development paths leading to the outcomes. In contrast to prognoses, the scenario analysis is not based on extrapolation of the past or the extension of past trends. It does not rely on historical data and does not expect past observations to remain valid in the future. Instead, it tries to consider possible developments and turning points, which may only be connected to the past. In short, several scenarios are fleshed out in a scenario analysis to show possible future outcomes. Each scenario normally combines optimistic, pessimistic, and more and less probable developments. However, all aspects of scenarios should be plausible. Although highly discussed, experience has shown that around three scenarios are most appropriate for further discussion and selection. More scenarios risks making the analysis overly complicated. Scenarios are often confused with other tools and approaches to planning. The flowchart to the right provides a process for classifying a phenomenon as a scenario in the intuitive logics tradition.

The most common horizons used in planning are one "quarter" (a quarter year, or three months), a year, two years, three years, four years (especially in a representative democracy where this is a quite common term of office and election cycle) and five years (in corporate planning). More far-sighted companies and government agencies may also use between ten and one hundred years. Thirty years is often used in mortgage contracts and US Treasury bonds such as the "long bond". One hundred years, sometimes considered equal to seven generations, is a time horizon often cited by the ancient Iroquois and modern Greens. The Forestry Commission in the UK plans over a century into the future.

Representative democracy democracy where citizens elect a small set of people to represent them in decision making

Representative democracy is a type of democracy founded on the principle of elected officials representing a group of people, as opposed to direct democracy. Nearly all modern Western-style democracies are types of representative democracies; for example, the United Kingdom is a constitutional monarchy, France is a unitary state, and the United States is a federal Constitutional republic.

A term of office is the length of time a person serves in a particular elected office. In many jurisdictions there is a defined limit on how long terms of office may be before the officeholder must be subject to re-election. Some jurisdictions exercise term limits, setting a maximum number of terms an individual may hold in a particular office.

Mortgage loan loan secured using real estate

A mortgage loan or, simply, mortgage is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can also be described as "a borrower giving consideration in the form of a collateral for a benefit (loan)".

Agreeing on a common time horizon for action is particularly important in global policy, as each participant will have very different time horizon habits. Achieving simultaneous policy is quite difficult without an agreement, as those taking action early may be seriously disadvantaged in competition with those taking action late on a regulatory matter. One attempt to bring about a global simultaneous policy is being attempted by the International Simultaneous Policy Organization's SIMPOL campaign. [1]

International Simultaneous Policy Organization

The International Simultaneous Policy Organisation (ISPO) is a voluntary organization that promotes the Simultaneous Policy (Simpol) campaign. It was founded by British businessman, John Bunzl, in 2000.

Also, in terms of physics, the term "time horizon" is also synonymous with event horizon, first identified in Stephen Hawking's A Brief History of Time.[ citation needed ] Hawking stated that the time horizon is the boundary that separates a black hole from other celestial bodies. Even time and light cannot escape once trapped in the black hole.

Event horizon the point of no return; boundary of a region of spacetime from which one cannot escape once entered

In general relativity, an event horizon (EH) is a region in spacetime beyond which events cannot affect an outside observer. In layman's terms, it is defined as the shell of "points of no return", i.e., the boundary at which the gravitational pull of a massive object becomes so great as to make escape impossible. An event horizon is most commonly associated with black holes. Light emitted from inside the event horizon can never reach the outside observer. Likewise, any object approaching the horizon from the observer's side appears to slow down and never quite pass through the horizon, with its image becoming more and more redshifted as time elapses. This means that the wavelength of the light emitted from the object is getting longer as the object moves away from the observer. The travelling object, however, experiences no strange effects and does, in fact, pass through the horizon in a finite amount of proper time.

Stephen Hawking British theoretical physicist, cosmologist, and author

Stephen William Hawking was an English theoretical physicist, cosmologist, and author who was director of research at the Centre for Theoretical Cosmology at the University of Cambridge at the time of his death. He was the Lucasian Professor of Mathematics at the University of Cambridge between 1979 and 2009.

<i>A Brief History of Time</i> book by Stephen Hawking

A Brief History of Time: From the Big Bang to Black Holes is a popular-science book on cosmology by British physicist Stephen Hawking. It was first published in 1988. Hawking wrote the book for nonspecialist readers with no prior knowledge of scientific theories.

See also

Gap Financing is a term mostly associated with mortgage loans or property loans such as a bridge loan. It is an interim loan given to finance the difference between the floor loan and the maximum permanent loan as committed.

The race to the bottom is a socio-economic phrase which is used to describe government deregulation of the business environment, or reduction in tax rates, in order to attract or retain economic activity in their jurisdictions. An outcome of globalization and free trade, the phenomenon may occur when competition increases between geographic areas over a particular sector of trade and production. The principal effect and intent of these actions is to make labor rates "more competitive", the principal cost of business, together with other factors, and thus the metaphor where the bottom is the lowest wage that can be paid for that labor.

A timetable is a kind of schedule that sets out times at which specific events are intended to occur. It may also refer to:

Related Research Articles

Black hole astronomical object so massive that anything falling into it, including light, cannot escape its gravity

A black hole is a region of spacetime exhibiting such strong gravitational effects that nothing—not even particles and electromagnetic radiation such as light—can escape from inside it. The theory of general relativity predicts that a sufficiently compact mass can deform spacetime to form a black hole. The boundary of the region from which no escape is possible is called the event horizon. Although the event horizon has an enormous effect on the fate and circumstances of an object crossing it, no locally detectable features appear to be observed. In many ways a black hole acts like an ideal black body, as it reflects no light. Moreover, quantum field theory in curved spacetime predicts that event horizons emit Hawking radiation, with the same spectrum as a black body of a temperature inversely proportional to its mass. This temperature is on the order of billionths of a kelvin for black holes of stellar mass, making it essentially impossible to observe.

Holographic principle physical principle in which physics inside a bounded region is fully captured by physics at the boundary of the region

The holographic principle is a principle of string theories and a supposed property of quantum gravity that states that the description of a volume of space can be thought of as encoded on a lower-dimensional boundary to the region—preferably a light-like boundary like a gravitational horizon. First proposed by Gerard 't Hooft, it was given a precise string-theory interpretation by Leonard Susskind who combined his ideas with previous ones of 't Hooft and Charles Thorn. As pointed out by Raphael Bousso, Thorn observed in 1978 that string theory admits a lower-dimensional description in which gravity emerges from it in what would now be called a holographic way. The prime example of holography is the AdS/CFT correspondence.

Hawking radiation theory by stephen hawking

Hawking radiation is blackbody radiation that is predicted to be released by black holes, due to quantum effects near the event horizon. It is named after the physicist Stephen Hawking, who provided a theoretical argument for its existence in 1974.

White hole Hypothetical celestial object, antagonistic to a black hole

In general relativity, a white hole is a hypothetical region of spacetime which cannot be entered from the outside, although matter and light can escape from it. In this sense, it is the reverse of a black hole, which can only be entered from the outside and from which matter and light cannot escape. White holes appear in the theory of eternal black holes. In addition to a black hole region in the future, such a solution of the Einstein field equations has a white hole region in its past. However, this region does not exist for black holes that have formed through gravitational collapse, nor are there any known physical processes through which a white hole could be formed. Although information and evidence regarding white holes remains inconclusive, the 2006 GRB 060614 has been proposed as the first documented occurrence of a white hole.

Monetary policy subclass of the economic policy

Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Black hole thermodynamics area of physical study that seeks to reconcile the laws of thermodynamics with the existence of black hole event horizons

In physics, black hole thermodynamics is the area of study that seeks to reconcile the laws of thermodynamics with the existence of black-hole event horizons. As the study of the statistical mechanics of black-body radiation led to the advent of the theory of quantum mechanics, the effort to understand the statistical mechanics of black holes has had a deep impact upon the understanding of quantum gravity, leading to the formulation of the holographic principle.

In black hole physics and inflationary cosmology, the trans-Planckian problem refers to the appearance of quantities beyond the Planck scale, which raise doubts on the physical validity of some results in these two areas, since one expects the physical laws to suffer radical modifications beyond the Planck scale.

Thorne–Hawking–Preskill bet

The Thorne–Hawking–Preskill bet was a public bet on the outcome of the black hole information paradox made in 1997 by physics theorists Kip Thorne and Stephen Hawking on the one side, and John Preskill on the other, according to the document they signed February 6, 1997, as shown in Hawking's The Universe in a Nutshell.

James Robertson, a British-born political and economic thinker and activist, became an independent writer and speaker in 1974 after an early career as a British civil servant.

Integrated coastal zone management (ICZM) or Integrated coastal management (ICM) is a process for the management of the coast using an integrated approach, regarding all aspects of the coastal zone, including geographical and political boundaries, in an attempt to achieve sustainability

Formalized long-range business planning, in particular that taught as a discipline in business schools or just reported in business books, has a history that goes back to the mid 20th century.

Initially pioneered by financial institutions during the 1970s as interest rates became increasingly volatile, asset and liability management is the practice of managing risks that arise due to mismatches between the assets and liabilities.

Korea Investment Corporation (KIC) was established in 2005 to preserve and enhance the long-term purchasing power of South Korea's sovereign wealth through efficient management of public funds in the international financial markets. KIC manages assets entrusted by the Government, the Bank of Korea, and other public funds as defined under the National Finance Act. KIC directly invests the entrusted assets or re-entrusts the assets to external managers. KIC's Total assets under management stood at US$91.8 billion at the end of 4th quarter 2015.

Asset economic resource, from which future economic benefits are expected

In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash. The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

A black hole firewall is a hypothetical phenomenon where an observer falling into a black hole encounters high-energy quanta at the event horizon. The "firewall" phenomenon was proposed in 2012 by Ahmed Almheiri, Donald Marolf, Joseph Polchinski, and James Sully physicist as a possible solution to an apparent inconsistency in black hole complementarity. The proposal is sometimes referred to as the AMPS firewall, an acronym for the names of the authors of the 2012 paper. The use of a firewall to resolve this inconsistency remains controversial, with high-energy physicists divided as to the solution to the paradox. 2016 LIGO observations provided tentative evidence of a firewall or of some other phenomenon that in extreme cases seems to violate relativity.

References

  1. Simpol.org - Campaign concept