Economic Value Of Equity - EVE

AAA

DEFINITION of 'Economic Value Of Equity - EVE'

A cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used by banks for asset/liability management.

INVESTOPEDIA EXPLAINS 'Economic Value Of Equity - EVE'

The value of a bank's assets and liabilities are directly linked to interest rates. By calculating its EVE, a bank is able to construct models that show the effect of different interest rate changes on its total capital. This risk analysis is a key tool that allows banks to prepare against constantly changing interest rates.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Equity

    1. A stock or any other security representing an ownership interest. ...
  3. Asset/Liability Management

    A technique companies employ in coordinating the management of ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Liability

    A company's legal debts or obligations that arise during the ...
  6. Current Liquidity

    The total amount of cash and unaffiliated holdings compared to ...
Related Articles
  1. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  3. What is the difference between cash ...
    Fundamental Analysis

    What is the difference between cash ...

  4. Is free cash flow the same as net free ...
    Trading Strategies

    Is free cash flow the same as net free ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center