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Contingent Convertible Bond
A contingent convertible bond (CoCo), also known as an enhanced capital note (ECN) is a fixed-income instrument that is convertible into equity if a pre-specified trigger event occurs. The concept of CoCo has been particularly discussed in the context of crisis management in the banking industry. It has been also emerging as an alternative way for keeping solvency in the insurance industry. Concept The concept was proposed by Professor Robert Merton in 1990 as a guarantee that gives holders "contractual right to seize the firm's assets (or its equity interest) whenever the value of assets is below the value of its guaranteed debt." and later published in the ''Harvard Law Review'' in 1991. These concepts may have served as inspiration to the instrument used during the Financial Crisis of 2007-08. The trigger and the loss absorption A contingent convertible bond is defined by two elements: a ''trigger activation'' and a ''loss-absorption'' mechanism. The trigger activation is t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Income
Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the principal amount on maturity. Fixed-income securities — more commonly known as bonds — can be contrasted with equity securities – often referred to as stocks and shares – that create no obligation to pay dividends or any other form of income. Bonds carry a level of legal protections for investors that equity securities do not — in the event of a bankruptcy, bond holders would be repaid after liquidation of assets, whereas shareholders with stock often receive nothing. For a company to grow its business, it often must raise money – for example, to finance an acquisition; buy equipment or land, or invest in new product development. The terms on which investors will finance the company will depend on the risk profile of the compan ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Commercial Bonds
Commercial may refer to: * a dose of advertising conveyed through media (such as - for example - radio or television) ** Radio advertisement ** Television advertisement * (adjective for:) commerce, a system of voluntary exchange of products and services ** (adjective for:) trade, the trading of something of economic value such as goods, services, information or money * Two functional constituencies in elections for the Legislative Council of Hong Kong: **Commercial (First) **Commercial (Second) * ''Commercial'' (album), a 2009 album by Los Amigos Invisibles * Commercial broadcasting * Commercial style or early Chicago school, an American architectural style * Commercial Drive, Vancouver, a road in Vancouver, British Columbia, Canada * Commercial Township, New Jersey, in Cumberland County, New Jersey See also * * Comercial (other), Spanish and Portuguese word for the same thing * Commercialism Commercialism is the application of both manufacturing and consumption towa ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. In financial accounting, debt is a type of financial transaction, as distinct from equity. The term can also be used metaphorically to cover moral obligations and other interactions not based on a monetary value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a "debt of gratitude" to the second person. Etymology The English term "debt" was first used in the late 13th century. The term "debt" com ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fixed Income Analysis
Fixed income analysis is the process of determining the value of a debt security based on an assessment of its risk profile, which can include interest rate risk, risk of the issuer failing to repay the debt, market supply and demand for the security, call provisions and macroeconomic considerations affecting its value in the future. It also addresses the likely price behavior in hedging portfolios. Based on such an analysis, a fixed income analyst tries to reach a conclusion as to whether to buy, sell, hold, hedge or avoid the particular security. Fixed income products are generally bonds: debt instruments requiring the issuer (i.e. the debtor or borrower) to repay the lender the amount borrowed (principal) plus interest over a specified period of time (coupon payments) until maturity. They are issued by government treasuries, government agencies, companies or international organizations. Calculating Value To determine the value of a fixed income security, the analyst mu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Contingent Claim Valuation
In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,Dale F. Gray, Robert C. Merton and Zvi Bodie. (2007). Contingent Claims Approach to Measuring and Managing Sovereign Credit Risk. ''Journal of Investment Management'', Vol. 5, No. 4, (2007), pp. 5–28 M. J. Brennan (1979). The Pricing of Contingent Claims in Discrete Time Models. ''The Journal of Finance''. Vol. 34, No. 1 (Mar., 1979), pp. 53-68 or more generally, that is dependent on the realization of some uncertain future event.Sean Ross What kinds of derivatives are types of contingent claims? Investopedia These are so named, since there is only a payoff under certain contingencies."Approaches to valuation", Ch2. in Aswath Damodaran (2012). ''Investment Valuation: Tools and Techniques for Determining the Value of any Asset''. John Wiley & Sons. Any derivative instrument that is not a contingent claim is called a forward commitment. The prototypical c ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Crisis Of 2007-08
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in financial systems at various scopes, thus the field can be roughly divided into personal, corporate, and public finance. In a financial system, assets are bought, sold, or traded as financial instruments, such as currencies, loans, bonds, shares, stocks, options, futures, etc. Assets can also be banked, invested, and insured to maximize value and minimize loss. In practice, risks are always present in any financial action and entities. A broad range of subfields within finance exist due to its wide scope. Asset, money, risk and investment management aim to maximize value and minimize volatility. Financial analysis is viability, stability, and profitability ass ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Structure
In corporate finance, capital structure refers to the mix of various forms of external funds, known as capital, used to finance a business. It consists of shareholders' equity, debt (borrowed funds), and preferred stock, and is detailed in the company's balance sheet. The larger the debt component is in relation to the other sources of capital, the greater financial leverage (or gearing, in the United Kingdom) the firm is said to have. Too much debt can increase the risk of the company and reduce its financial flexibility, which at some point creates concern among investors and results in a greater cost of capital. Company management is responsible for establishing a capital structure for the corporation that makes optimal use of financial leverage and holds the cost of capital as low as possible. Capital structure is an important issue in setting rates charged to customers by regulated utilities in the United States. The utility company has the right to choose any capital ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Price Manipulation
In economics and finance, market manipulation is a type of market abuse where there is a deliberate attempt to interfere with the free and fair operation of the market; the most blatant of cases involve creating false or misleading appearances with respect to the price of, or market for, a product, security or commodity. Market manipulation is prohibited in most countries, in particular, it is prohibited in the United States under Section 9(a)(2) of the Securities Exchange Act of 1934, in the European Union under Article 12 of the ''Market Abuse Regulation'', in Australia under Section 1041A of the Corporations Act 2001, and in Israel under Section 54(a) of the securities act of 1968. In the US, market manipulation is also prohibited for wholesale electricity markets under Section 222 of the Federal Power Act and wholesale natural gas markets under Section 4A of the Natural Gas Act. The US Securities Exchange Act defines market manipulation as "transactions which create an ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Contagion
Financial contagion refers to "the spread of market disturbances mostly on the downside from one country to the other, a process observed through co-movements in exchange rates, stock prices, sovereign spreads, and capital flows". Financial contagion can be a potential risk for countries who are trying to integrate their financial system with international financial markets and institutions. It helps explain an economic crisis extending across neighboring countries, or even regions. Financial contagion happens at both the international level and the domestic level. At the domestic level, usually the failure of a domestic bank or financial intermediary triggers transmission when it defaults on interbank liabilities and sells assets in a fire sale, thereby undermining confidence in similar banks. An example of this phenomenon is the subsequent turmoil in the United States financial markets. International financial contagion, which happens in both advanced economies and developing e ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Return On Equity
The return on equity (ROE) is a measure of the profitability of a business in relation to the equity. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on ''assets minus liabilities''. ROE measures how many dollars of profit are generated for each dollar of shareholder's equity. ROE is a metric of how well the company utilizes its equity to generate profits. The formula : ROE is equal to a fiscal year net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage. Usage ROE is especially used for comparing the performance of companies in the same industry. As with return on capital, a ROE is a measure of management's ability to generate income from the equity available to it. ROEs of 15–20% are generally considered good. ROE is also a factor in stock valuation, in association with other fi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
