What is Transaction Risk? Transaction Risk is the exposure to uncertainty factors that may impact the expected return from a deal or transaction. It can include but is not limited to foreign exchange risk, commodity, and time risk. It essentially encompasses all negative events that can prevent a deal from happening. A deal with a…
What are Negative-Yielding Bonds? Negative-yielding bonds are bonds that cause bondholders to lose money when they mature. This happens when holders of such bonds will end up with less money than what they used to purchase them. In 2019, the amount of negative-yielding bonds in the global market is $13 trillion. How do Negative-Yielding Bonds…
What is Merger Monday? Merger Monday refers to the practice by companies of announcing major mergers and acquisitions on a Monday. The involved parties finalize the details of the deal over the weekend and make the announcement first thing on Monday morning. The goal is, of course, to pass on the information about the joining…
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….
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…
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 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…
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…
