The RISK of loss arising from a change in the historical relationships, or CORRELATIONS, between ASSETS. Correlation risk can be found in certain COMPLEX OPTIONS and COMPLEX SWAPS and may also impact

To jointly sign and endorse. A co-signer of a loan is liable for paying back the debt if the other individuals fail to do so. Co-signing is a way for someone with

The joining of service capability from either inside or outside a business, or both, to realize the same goal. Outsourcing, as an example, can provide internal expertise missing within a company and

INFLATION that results from increased costs of production, including raw materials and labor. Higher production costs are priced into goods and services, leading labor to demand higher wages to meet the higher

The total costs a firm bears in funding its operations through DEBT and EQUITY, equal to the rate of return needed to induce CAPITAL suppliers to invest or lend. The cost of

The FUTURE VALUE of costs and benefits associated with holding an ASSET, which typically includes the cost of financing, INSURANCE, transportation and/or storage, less benefits derived from lending the asset and any

The implicit or explicit price a company must pay to manage its RISK exposures; it is typically comprised of the expected costs and direct and indirect losses arising from RISK RETENTION, LOSS

A clause in some retail space lease agreements that entitles a tenant to a decrease in the amount of rent payments if a specified other tenant leaves the location. This is a

Airports adjacent to each other, and sharing in setting computing fare or moving freight.

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