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Who are the key parties in ABCP program?

The key parties to an ABCP program are: Originator-seller – An entity that originates financial assets and sells those assets directly or through a majority-owned affiliate to an S...


When are convertible bonds converted?

A convertible bond’s minimum price is the greater of either its conversion value or its straight value, which equals the present value of the bond’s cash flows discounted using the...


What types of warrants are there?

A bond cum warrant is a bond with a detachable subscription (generic) warrants that may be traded separately from the bond.  Detachable warrants are also issued with preferred stoc...


What is yield to worst?

Yield to put (YTP) is the total return on a bond that has an embedded put option to sell it back to the issuer if the puttable bond is held until the first permissible date when th...


What is the money market?

The money market is the financial market for high-quality debt instruments issued with an original maturity of up to one year.  The money market is distinguished from the capital m...


What is the impairment of leased assets?

An impairment is a permanent reduction in the carrying value of an asset below its fair value (US GAAP) or recoverable amount (IFRS), which occurs when it is deemed improbable that...


What is the Euromarket?

The Euromarket is the over-the-counter market for interbank deposits, loans, debt, equity and derivative instruments denominated in a currency foreign to the bank, debtor or issuer...


What is the Capital Asset Pricing Model (CAPM)?

The Capital Asset Pricing Model (CAPM) is frequently used in portfolio management to determine the theoretically appropriate required rate of return on an asset, it relating the pe...


What is tax-equivalent yield (TEY)?

Interest income from municipal bonds is not subject to US federal income tax and generally not subject to state and local taxation in the state of issuance.  The tax-equivalent yie...


What is required yield?

Required yield is the minimum yield investors require before making an investment of a given level of risk.  The required yield of any alternative investment is compared to the req...


What is preferred stock?

Preferred stock is a form of equity evidencing ownership in the capital stock of the issuing company that has preference rights over its common stock.  Unlike common stock, preferr...


What is money market yield (MMY)?

Money market yield (MMY) is the total return on money market instruments equal to the increase (decrease) in value of an instrument above (below) its purchase price plus any invest...


What is investment yield?

Investment yield is the bond equivalent yield (BEY) measure of return used by the US Treasury to compare the yield on T-bills with bonds maturing on the same date, calculated as a...


What is holding period yield (HPY)?

Holding period yield (HPY) is the unannualized percentage return on an asset or portfolio of assets from purchase date to its maturity or sale equaling the sum of increase (decreas...


What is government security?

A government security any debt instrument issued by a central government, including bills, notes and bonds, whether discounted, variable- or fixed-rate, negotiable or nonnegotiable...


What is Euro commercial paper (ECP)?

Euro commercial paper (ECP) is a short-term, unsecured, unsubordinated bearer promissory note issued in Eurocurrency in interest-bearing form and quoted on an add-on basis, commonl...


What is effective annual yield (EAY)?

Effective annual yield (EAY) is annualized nominal rate of interest based on a 365-day year including all costs incurred in an investment or borrowing that is compounded every inte...


What is duration?

Often confused with maturity, duration is the weighted average maturity period of the cash flow or of any series of linked cash flows on a rate-sensitive instrument.  It reflects t...


What is discount yield?

The discount yield – the term used by the US Treasury (USDT) for bank discount yield (BDY) – is the yield quoted on US T-bills on a simple interest basis (i.e., without compounding...


What is convexity?

Convexity (γ) is a measure of the sensitivity and stability of duration over the yield curve, it describing the nonlinear price/yield relationship and accounts for the increasing s...


What is common stock?

Common stock is the residual equity in a company in that all other financial claims against the firm have priority over this class of equity, it typically entitling its holders to...


What is commercial paper?

Commercial paper (CP) is a negotiable, unsecured typically straight discount bearer money market instrument with a maturity of less than one year, usually issued by large nonbank c...


What is bond seniority?

When several issues of debt securities (bonds and note) are outstanding, a hierarchy can be specified: Secured – The status of the claims of bondholders backed by specific assets o...


What is bond equivalent yield (BEY)?

The bond equivalent yield (BEY) is the total yield on investments that takes into account the interest applicable on bonds, which is the simple interest (uncompounded) semiannual b...


What is asset securitization?

Securitization is the creation and issuance of marketable debt securities either through true-sale securitization or synthetic securitization. A true-sale securitization is the out...


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