Call Protection In Credit Agreements

Credit optionsA type of credit derivatives. Options on a credit spread take the form of credit spread options. The put buyer pays an advance fee to the seller in exchange for a conditional payment in case the spread on an asset exceeds a pre-agreed threshold. This is a call option in which the underlying is the spread on a third-party security. For example, if you hold a loan issued by a third party and the spread of the loan on the comparable cash interest rate was 200 basis points, you can buy an option that will pay off if the spread extends to 300 basis points. (Although in this example, the cash rate is used as a basis for comparison, it is increasingly common to use swap rates.) In other words, extending the credit spread to a defined size gives the protection buyer the right to demand payment from the protection seller. It is issued with the possibility of exchanging the loan for a fixed number of common shares at the choice of the bondholder, which allows the convertible loan to participate in the growth potential of the underlying common shares. He is a senior at shares in the company`s capital structure, although probably junior at other corporate debts. Convertible bonds are often searchable.

RefundsThe reduction of unpaid invoices due to a creditor due to a dispute, return, set-off or cause other than the insolvency of an account debtor. Credits Accounting adjustments that reduce debt balances to account debtors. Typically, credits are generated to account for returned merchandise and when customers are credited for damaged merchandise. Appropriations are the accounting reflection of retrobookings. CorrelationThe degree of relationship between two data sets. A correlation close to plus 1, called a positive correlation, indicates that changes in one data set are closely related to changes in the other group and that data sets change in the same direction. A close correlation of minus 1, called a negative correlation, indicates that changes in one data set are closely related to changes in the other group and that data sets change in the opposite direction. A near-zero correlation indicates little or no relationship between changes in the two data sets. Call protection is a provision of certain bonds that prohibits the issuer from redeeming them for a specified period of time. The period during which the bond is protected is called the reprieve or pillow period.

Companion SliceA certain level or segment of REMIC securities. A REMIC tranche structured in such a way that it absorbs a disproportionate share of the volatility caused by fluctuations in advances of the underlying collateral.. . . .

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