Defined terms for the annuity market and lifetime income landscape.
Inflation adjustment is the operation of converting a nominal dollar figure into its purchasing-power equivalent at a chosen reference date, using an observed or projected inflation index, so that amounts stated at different times are analytically comparable.
Internal rate of return is the discount rate at which the net present value of a stream of cash flows equals zero, expressed as an annualized rate.
Maximum drawdown is the largest percentage decline from peak to trough that a portfolio has experienced over a specified historical period, capturing the worst point-to-point decline it has suffered.
Monte Carlo simulation is a stochastic modeling technique that generates many possible outcomes by repeatedly drawing random values from specified probability distributions, then summarizes the resulting distribution to characterize what could happen.
Net present value is the sum of the present values of all cash flows associated with a decision, treating outflows as negative and inflows as positive, and expressed as a single figure at the moment the decision is made.
