Compounding techniques refer to the process of reinvesting an assets earnings, from either capital gains or interest, to generate additional earnings over time. This growth is calculated based on the principal amount and the accumulated interest, and it is a direct realization of the time value of money concept. The key features of compounding techniques include:

• Interest on interest: Compounding can be construed as interest on interest, which magnifies returns to interest over time.
• Compounding period: When banks or financial institutions credit compound interest, they will use a compounding period such as annual, monthly, or daily.
• Frequency of interest payments: Compounding considers the principal amount, the rate of interest, and the frequency of interest payments.
• Compounding techniques: There are several compounding techniques used in the treasury markets, including simple interest, annual compounding, semi-annual compounding, and daily compounding.

Compounding techniques are used to calculate the future value of an investment or loan, and they are crucial in finance. The gains attributable to the effects of compounding are the motivation behind many investing strategies, such as dividend reinvestment plans. On the other hand, when compound interest is applied to liabilities like debt, it becomes a considerable burden for debtors.

In summary, compounding techniques are a method of calculating total interest on the principal where the interest earned is reinvested, resulting in exponential growth of assets or capital.