Credit Administration
What is Credit Administration? Credit administration involves a department in a bank or lending institution that is tasked with managing the entire credit process. Lending money is one of the core functions of a bank, and banks generate revenue by charging a higher interest rate on loans than the interest they pay on customer deposits….
Ex-Ante vs Ex-Post
What is Ex-Ante vs Ex-Post? Ex-ante and Ex-post are Latin terminologies used in predicting the returns of a security. In this article, we will discuss ex-ante vs ex-post in detail. When transcribed from Latin, ex-ante is the prediction of a particular event in the future, such as the potential returns of a company. Ex-ante predictions are…
Credit Risk Analysis
What is Credit Risk Analysis? Credit risk analysis extends beyond credit analysis and is the process that achieves a lender’s goals by weighing the costs and benefits of taking on credit risk. By balancing the costs and benefits of granting credit, lenders measure, analyze and manage risks their business is willing to accept. The creditworthiness…
Payoff Graphs vs Profit & Loss Diagrams
Payoff Graphs vs Profit & Loss Diagrams Investors use payoff graphs vs profit & loss diagrams to determine returns from options trading. Option payoffs are simply the reward or return that one can expect from investing in or being involved in options trading. One can either earn a profit on the invested amount or, in…
Collateralized Loan Obligations (CLO)
What are Collateralized Loan Obligations (CLO)? Collateralized loan obligations (CLO) are securities that are backed by a pool of loans. In other words, CLOs are repackaged loans that are sold to investors. They are similar to a collateralized mortgage obligation (CMO), except that the underlying instruments are loans instead of mortgages. Understanding Collateralized Loan Obligations…
Consumer Proposal
What is a Consumer Proposal? A consumer proposal is a legally binding agreement negotiated with creditors through a Licensed Insolvency Trustee (LIT). The proposal outlines how an individual or business is to repay its debt to creditors. Understanding a Consumer Proposal A consumer proposal is initiated when an individual or business lacks the capacity to…
Credit Spread
What is Credit Spread? Credit spread is the difference between the yield (return) of two different debt instruments with the same maturity but different credit ratings. In other words, the spread is the difference in returns due to different credit qualities. For example, if a 5-year Treasury note is trading at a yield of 3%…
Equity Statement
What is an Equity Statement? An equity statement – also referred to as a statement of owner’s equity or statement of changes in equity – is a financial statement that a company is required to prepare along with other important financial documents at the end of a reporting period. In the United States, the statement…
Commercial Loans: Structures and Strategies for Smarter Lending
What is a Business Commercial Loan? A commercial loan is a form of credit that is extended to support business activity. Examples include operating lines of credit and term loans for property, plant, and equipment (PP&E). While a few exceptions exist (including commercial property owned by an individual), the overwhelming majority of commercial loans are…
