What is variance in loan?

Variance is a statistical measure of how much a set of observations differ from each other. In accounting and financial analysis, variance also refers to how much an actual expense deviates from the budgeted or forecast amount.

How is loan variance calculated?

Understanding Variance It is calculated by taking the differences between each number in the data set and the mean, then squaring the differences to make them positive, and finally dividing the sum of the squares by the number of values in the data set.

What is interest variance?

A variance swap is a financial derivative used to hedge or speculate on the magnitude of a price movement of an underlying asset. These assets include exchange rates, interest rates, or the price of an index. In plain language, the variance is the difference between an expected result and the actual result.

What causes variable interest rates to change?

A variable interest rate fluctuates over time because it is based on an underlying benchmark interest rate or index that changes periodically with the market.

How does a variance work?

A variance is a request to deviate from current zoning requirements. If granted, it permits the owner to use the land in a manner not otherwise permitted by the zoning ordinance. Usually, the land owner seeking the variance files a request or written application for a variance and pays a fee.

Is variance and volatility the same?

While variance captures the dispersion of returns around the mean of an asset in general, volatility is a measure of that variance bounded by a specific period of time.

What is the danger of taking a variable rate loan?

One major drawback of variable rate loans is the prospect of higher payments. Your loan’s interest rate is tied to a financial index, which fluctuates periodically. If the index rises before your loan adjusts, your interest rate will also rise, which can result in significantly higher loan payments.

Is it better to have a fixed or variable interest rate?

Generally speaking, if interest rates are relatively low, but are about to increase, then it will be better to lock in your loan at that fixed rate. On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan.

What is another name of variance?

What is another word for variance?