This category covers all kinds of topics in finance including corporate finance and financial management. The topics on financial institution and stock exchange will also be included.
An exchangeable debt or bond can be converted into equity of a company other than the issuer of the debt. The investors keep the option of converting the bond into equity but not the legal obligation. An exchangeable bond offers embedded diversification of risk for the investors. At the same time, investors face a higher […]
What is an Exchangeable Bond and How Does It Work? Read More »
A call provision gives the issuer a right to redeem the issued debt before the maturity date. A call provision can be offered with any fixed-income instrument such as preferred stocks or bonds. The call provision is most commonly used with bonds, termed callable bonds. Issuers embed the call provision with a bond to protect
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Warrants and call options are both similar in several ways. These instruments give a holder the right but not the obligation to buy shares of a company at a specified period on or before the maturity date. They function similarly with holders looking to make profits or use these instruments for tax advantages. There are
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Venture Capital or simply called VC in short form is a type of private equity. Venture Capital Funds manage the VC for investors looking to invest money in startups and early growth stage companies. It is termed as a high-risk high-reward investment type. These are managed funds by VC firms and investors. Venture capital funds
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Collateralized debt obligations (CDOs) are derivates that are used for repackaging the debt products and are sold in the secondary market. Banks and other financial institutes have large portions of asset-backed loans and debt products. These institutes sell these debt obligations to investors in the secondary market. Collateralized Debt Obligations are backed by assets and
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Time draft and sight draft are both payment instruments used in international trade. Both types of instruments offer certain benefits to both parties in a trade deal. A time draft is a confirmed payment for the exporter but comes with a delay. A sight draft is a quicker payment method but becomes payable upon presentation
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A bill of exchange can have different types of draft payment instruments. The most common ones are sight draft and time draft. It becomes payable at sight to the payee. A sight draft is a preferred payment method by the exporters as it protects them from the default risk. An exporter can keep the title
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A trade acceptance is a bill of exchange with a promise to pay by the buyer. It is widely used in international trade. An acceptance provides further assurance to the seller of payment. Unlike a common type of bill of exchange, a trade acceptance becomes a legal obligation. It comes with the amount and payment
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Interest rate risk hedging can arise due to fluctuation in interest rates. Macroeconomic factors affect the interest rates. Central Banks change interest rates from time to time that can directly affect the borrowers and investors. Individuals and corporate customers are prone to interest rate risks alike. Also, interest rates can occur for investors as well
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Bonds are typically fixed-income instruments. Step-up bonds are a special type of bond that comes with rising interest rates. These bonds offer a low-interest rate initially and then an increased interest rate after a specific period. It can come with a single interest rate rise or multiple interest rate increases. The interest rates can also
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