Definition of discount factor in US English:

discount factor

noun

Finance
  • A factor which, when multiplied by a predicted future cash flow from a loan or some other form of debt, gives its present value.

    ‘the further out the payday is, the greater the discount factor that will be used’
    • ‘Politically, people have become used in recent years to getting budget largesse, and there will also be a certain discount factor.’
    • ‘The surge in bond yields, which is the prime determinant of the discount factor, flies in the face of stock market performance.’
    • ‘The interest rate is determined by the discount factor of only the rich agent.’
    • ‘The opportunity cost of that investment with a 10% discount factor is $100 000 pa.’
    • ‘In contrast, higher discount factors weight past observations more heavily, making the model less sensitive to short-term fluctuations in the data.’