A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Debentures are fixed interest securities in return for long-term loans, they tend to be dated for redemption between ten and forty years ahead of the date of issue. They may be secured by a floating charge on the company's assets or they may be tied to specific, named assets.
- Debenture interest has to be paid by a company whether it makes a profit or not - if the debenture holders do not get pad they can legally force the company into liquidation to realize their claims on the company's assets.
- A security representing a loan by an investor to an issuer such as a corporation, municipality, the federal government or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest.
- The schedule for repayment of interest and principal (or the scheduled sinking fund contribution) on an outstanding debt.
debt-type (or instrument type):
- The form of the credit obligation, (e.g., bank loan, public bond, preferred stock).
- Actual default:
(1) The failure to pay interest or principal promptly when due.
(2) The failure to perform on a futures contract as required by an exchange.
- Technical default:
Continuing to make promised payments while failing to maintain agreed (via loan covenants) financial rations and/or conditions.
- The likelihood that a debt instrument will default within a stated timeframe.
- A financial contract whose value is derived from the performance of assets, interest rates, currency exchange rates, or indexes. Derivative transactions include a wide assortment of financial contracts including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations thereof.
direct credit substitute
- The Federal Reserve Board's term for a credit enhancement, that is, a means of improving the credit quality of a loan or a bond.
- The quoted bond price, including the accrued interest. (Cf. clean price.) In application, in certain non-U.S. bond markets, if you ask your broker a bond's price, he quotes the dirty price. Thus, your check for that amount would be sufficient to buy the bond.
- "During a time of credit distress, debt holders may be effectively forced to accept securities in exchange for their debt claim -- such securities being of a lower value than the nominal present value of their original claim. They may have a lower coupon, delayed sinking funds, and/or lengthened maturity. For historical estimation of default probabilities, this would count as a default event since it can significantly impair value. In the U.S., exchange offers on traded bonds may be either registered with the SEC or unregistered if they meet requirements under Section 3(a)(9) of the Securities Act of 1933. Refer to Asquith, Mullins & Wolff(1989)."
The main feature of Distribution Bonds, apart from their lower risk profile, is that they address the traditional problem with many income producing investments - the fact that it is sometimes difficult to tell whether it is truly income you are spending - or whether you are simply eating into your capital.
Distribution Bonds produce dividends twice a year regardless of the value of the capital - so if you simply spend the dividends, you know with certainty that you are not eating into your capital at all. There are one or two exceptions to this - some investment managers do reserve the right to take from the capital to supplement the income. The value of the underlying funds will vary according to the markets.
- As a general rule the underlying funds are pretty conservative - though they will include exposure to shares. Several of the leading insurers offer products in this area.
- A risk management technique that mixes a wide variety of investments within a portfolio, thus minimizing the impact of any one security on overall portfolio performance.
- A weighted average of the number of years until a financial instrument's cash flows (e.g., a bond's principal and each of its coupons) arrives.
- 2. A measure of the sensitivity of the value of a financial instrument (i.e., a sequence of cash flows) to a change in its yield to maturity. The two main variants of Duration are Macaulay Duration (q.v.) and Modified Duration (q.v.).