An institution that is a party to a financial transaction with CREDIT RISK, such as a LOAN, DERIVATIVE, or financing.

The periodic CASH FLOW payable by an issuer or borrower to an investor or lender for the use of DEBTbased CAPITAL. Coupon payments may be based on fixed or floating INTEREST RATES,

A statistical measure of the relationship between two variables (e.g., financial ASSET prices), often used to determine the magnitude of CORRELATION. The covariance between two assets can be computed via: where xAj

An OPTION position where the seller of the option already holds the UNDERLYING ASSET or cash that must be delivered if the buyer EXERCISES the option. Selling covered options is a relatively

An OPTION position where the seller of a PUT OPTION already has sufficient cash on hand to purchase the UNDERLYING ASSET if the buyer EXERCISES the option. Selling covered puts is a

A longdated EQUITY OPTION (i.e., three to five years) issued by a financial intermediary on a company

The seller of a COVERED OPTION that either owns the UNDERLYING ASSET (deliverable under a CALL OPTION) or has sufficient cash on hand to acquire the asset (under a PUT OPTION) should

A SPREAD in the energy market reflecting the price differential between crude oil and a refined product, generally gasoline or heating oil; the spread can be traded through a single FUTURE or

A process where creditors with existing CREDIT RISK to a company that has filed a REORGANIZATION plan under BANKRUPTCY protection choose not to participate in the new plan and have their interests

A FOREIGN EXCHANGE PEGGING process based on official CENTRAL BANK intervention activity that adjusts the value of the local currency through small preannounced changes or average target rates over a period of

A contra account that is used to fund EXPECTED CREDIT LOSSES. Reserves are established by deducting required amounts from operating revenues or current income, and are used when a COUNTERPARTY ceases to

An attachment to the MASTER AGREEMENT framework set forth by the INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION that defines credit terms between two COUNTERPARTIES, including credit thresholds, COLLATERAL requirements, and credit termination events.

A CORPORATE FINANCE transaction where an investor group or acquiring company gradually purchases the COMMON STOCK of a target company. Once a specified block has been accumulated a formal TENDER OFFER is

A single COLLATERAL agreement that covers multiple LOANS or credit facilities. Also known as DRAGNET CLAUSE. See also POOLED PORTFOLIO COLLATERAL, TRANSACTIONSPECIFIC COLLATERAL.

A GUARANTEE provided by one company to another company that is often related, such as a subsidiary or joint venture, and a reciprocal guarantee provided in the opposite direction. Cross guarantees may

A FOREIGN EXCHANGE rate between two currencies that does not involve the US dollar.

Minority stakes held by two companies in each other; this is often done to help strengthen long  term business relationships, and is particularly prevalent in RELATIONSHIP MODEL countries such as Germany and

Aproxy or substitute HEDGE that is used when an exact replicating hedge is not available, generally by identifying a contract (e.g., a DERIVATIVE) that has a high degree of CORRELATION with the

A clause in a LOAN, BOND, or DERIVATIVE agreement indicating that a technical DEFAULT on one obligation triggers a technical default in all other obligations. Cross default clauses are commonly used in

A practice where ORDERS to buy and sell listed securities are matched (