What is the CAMELS Rating System? The CAMELS Rating System was developed in the United States as a supervisory rating system to assess a bank’s overall condition. CAMELS is an acronym that represents the six factors that are considered for the rating. Unlike other regulatory ratios or ratings, the CAMELS rating is not released to…
What is Netback? Netback is a calculation used to assess companies, specifically in the oil and gas industry. This benchmark considers the revenue generated from the sale of oil and gas, and nets it against specific costs required to bring the product to market. Often, netback is shown as a per-barrel measurement. It essentially shows how…
What are Fixed Income Risks? Fixed income risks occur based on the volatility of the bond market environment. Risks impact the market value of the security when it is sold, cash flow from the security while it is held, and additional income made by reinvesting cash flows. By understanding the risks involved, investors can be…
What are Corporate Bonds? Corporate bonds are issued by corporations and usually mature within 1 to 30 years. The bonds usually offer a higher yield than government bonds but carry more risk. Corporate bonds can be categorized into groups, depending on the market sector the company operates in. They can also be differentiated based on…
What is Entry Multiple? An entry multiple, commonly used in leveraged buyouts, refers to the price paid for a company as a function of a financial metric. The entry multiple is crucial for private equity firms to know, as it helps them determine the purchase price of a company relative to a financial metric. It…
What is a Recourse Loan (Debt)? A recourse loan – alternatively known as recourse debt – is a type of loan that makes the borrower 100% liable for any outstanding balance. The loans require collateral (as they are secured loans). With an asset on the table to act as collateral, the lender may then repossess…
What is the Libra Cryptocurrency? Libra was a cryptocurrency created by Facebook, renamed into Diem at the end of December 2020 and wound down in January 2022. The Libra cryptocurrency was intended to be used as a simple, low-fee global blockchain-based digital currency. It was envisioned to be digital money on your phone, which can…
What are Credit Card Asset-backed Securities? Credit card asset-backed securities (ABS) are fixed income bonds that are backed by the cash flow from credit cards. As companies collect on credit card payments, interest, and fees, cash flows that fund the principal and coupon payments of bonds are collected. The popularity of these securities began in…
What are Special Drawing Rights? Special Drawing Rights, often referred to as SDRs, are an interest-bearing international reserve asset used by the International Monetary Fund (IMF). The SDR is based on a basket of currencies and comes with the currency code, XDR, which it may also be referred to by. The SDR serves as the…
What is Fixed Income Interest Rate Risk? Fixed income interest rate risk is the risk of a fixed income asset losing value due to a change in interest rates. Since bonds and interest rates have an inverse relationship, as interest rates rise, the value/price of bonds falls. Interest rate risk can be measured by the…
