What is a Rising Star? A Rising Star is a business or a company that is relatively new to the debt capital markets, with little or no history of debt repayment, which makes it difficult to assess its creditworthiness. Despite the lack of history, the company’s performance is strong enough to attract a certain group…
What is a Callable Certificate of Deposit? A Callable Certificate of Deposit is an FDIC-insured time deposit with a bank or other financial institutions. Callable CDs can be redeemed by the issuer before their actual maturity date, within a specified time frame and call price. Like other regular CDs, a callable CD pays a fixed…
What is a Hedging Arrangement? Hedging arrangement refers to an investment whose aim is to reduce the level of future risks in the event of an adverse price movement of an asset. Hedging provides a sort of insurance cover to protect against losses from an investment. It typically consists of shielding a portfolio by using…
What are ADRs? American Depository Receipts (ADRs) are stocks that are sold in the US market but represent ownership of the underlying shares in a foreign company. An ADR trades in US dollars and they allow investors to avoid the risk of transacting in a foreign currency. Before the introduction of American Depository Receipts, investors…
What Was LIBOR? LIBOR, or the London Interbank Offered Rate, was a benchmark interest rate that represented the average rate at which major global banks were willing to lend to each other on a short-term basis. It was calculated for five currencies (USD, GBP, EUR, JPY, CHF) and multiple borrowing periods, or “tenors,” ranging from…
What is Expected Return? The expected return on an investment is the expected value of the probability distribution of possible returns it can provide to investors. The return on the investment is an unknown variable that has different values associated with different probabilities. Expected return is calculated by multiplying potential outcomes (returns) by the chances of…
What is Short Covering? Short covering, also called “buying to cover”, refers to the purchase of securities by an investor to close a short position in the stock market. The process is closely related to short selling. In fact, short covering is part of short selling, which involves the risky practice of borrowing and selling…
What is Rolling LEAP Options? Rolling LEAP options refers to extending the trading duration of stock options to the next trading period. Investors rollover options to manage a winning or losing position. In a losing position, they extend the time to hopefully prevent losses before they close the position. However, they must possess sufficient and…
