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What is an A-note?
An A-note describes a slice of the top tranche of an asset-backed security. Asset-backed securities are categorized into tranches for quality, and an A-note is a share of the best available tranche. Asset-backed securities include Collateralized Mortgage Obligations (see — CDOs), Mortgage-Backed Securities, Credit Card Debt, and other kinds of cash flows, especially related to debt instruments that have been pooled and sold to investors. This shifts the risk from the lending institution to the underwriters and investors in the asset-backed security. Continue reading...
What is Subordinated Debt?
Subordinated Debt is a junior security which will be serviced after the Unsubordinated Debt in the event of a company bankruptcy. Subordinated Debt has been deemed less important than the Unsubordinated Debt that a company has taken on, in terms of what priority it will have for payment in the event of company default. The amount of money and length of term on the loan are considerations when making this distinction. Continue reading...
What is an Asset-Backed Security?
Asset-backed securities are bonds or notes that come in several forms, but they typically use the cash flows from debt repayment as the asset that backs them. The assets that back the bonds called asset-backed securities (ABS) can be basically anything with a fairly predictable cash flow, but debt repayment cash flows tend to be used the most. These include credit card debt, home equity loans, auto loans, student loans, and so forth. Continue reading...
What are credit derivatives?
Stemming from the hedging strategy of Credit Default Swaps, an entire speculative derivatives market continues to grow, in which tranches of credit risk and indices are traded. With the ballooning of consumer credit in recent years, it is only natural that a credit derivatives market would follow it. In essence, the risk associated with a loan or bond is separated from the actual asset and is passed on to a counter-party for a premium, and then other market participants become involved, perhaps in the form of futures contracts or other derivatives. Continue reading...
A-/A3 — credit rating
A- — S&P / Fitch A3 — Moody’s Rating institutions assign various levels of credit ratings to signify the chance of default; the A-/A3 rating is considered Investment Grade, but it is getting closer to the Junk Bond range. If a company or debt issue has a rating of A-/A3, it means that S&P and Fitch have given it an A- and Moody’s has given it an A3 rating. They have their own symbology for their ratings system but these are at the same level on both scales: these ratings are at the 6th or 7th degree from the top possible ratings, which is AAA/Aaa. Continue reading...
What is a foreign transaction fee?
Credit card companies and banks generally charge an additional percentage for all purchases made with a card in a foreign country. If you’re traveling abroad, you may want to find another way to pay. Most credit card companies and bank debit cards will charge an additional percentage on transactions made abroad, to help them pay the cost of clearing the transaction with international institutions. This is sometimes called a currency conversion fee. Continue reading...
What is the CAC 40 Index?
The CAC 40 is an index tracking performance of stocks in France. The CAC 40 is an index that tracks the 40 largest capitalization stocks of the 100 listed on the Euronext Paris stock exchange. It provides a good barometer for the performance and standing of the French economy. What is the DAX? What is the EURO STOXX 50? Continue reading...
What is a Credit Crunch?
A credit crunch is when access to liquidity dries up dramatically in rapid fashion, or becomes less accessible due to a spike in borrowing rates. Central banks will often step-in to try and curb the lack of liquidity by offering the markets access to cash at lower than market rates, in the event of a crisis. Perhaps the most famous credit crunch in history occurred in late 2007 and early 2008, when bank balance sheets became highly leveraged overnight due to mark-to-market accounting rules that were applied to the mortgage backed security portfolios on their balance sheets. Continue reading...
Is VIX the Key to Tracking Volatility?
When market volatility spikes or stalls, financial websites, bloggers, social media, newspapers, and television commentators all refer to the VIX®. Formally known as the Cboe Volatility Index, the VIX is a benchmark index designed specifically to track S&P 500 volatility. Most investors familiar with the VIX commonly refer to it as the "fear gauge," because it has become a proxy for market volatility. The VIX was created by the Cboe Global Markets (Cboe), originally known as the Chicago Board Options Exchange, which bills itself as "the largest U.S. options exchange and creator of listed options." The Cboe runs a for-profit business selling investments to sophisticated investors, including hedge funds, professional money managers, and individuals seeking to profit from market volatility. To facilitate and encourage these investments, the Cboe developed the VIX, which tracks market volatility on a real-time basis. Continue reading...
Tracking the Best Railroad Stocks: A Financial Journey
Embark on a journey through the financial landscapes of Union Pacific, CSX, and Norfolk Southern, and uncover why these railroad stocks are the industry's prime movers, poised for sustainable growth and innovation. Continue reading...
What Is Accounting?
Accounting is a critical function that forms the foundation of financial management for any business. It involves recording, summarizing, and interpreting financial transactions to provide valuable insights into an organization's financial health, performance, and operational efficiency. This information is crucial for informed decision-making, compliance with regulations, and strategic planning. Continue reading...
What is the structure of Collateralized Loan Obligations (CLOs)?
Unlock the secrets of Collateralized Loan Obligations (CLOs)! Dive into their diverse tranches, creation process, benefits (diversification, higher yields), and risks (credit, liquidity). Make informed CLO investments with our comprehensive guide. 💼📊 #Investing #CLOs #Finance Continue reading...
What are Collateralized Debt Obligations (CDOs)?
Collateralized Debt Obligations (CDOs) are bond-like investments backed by debts such as mortgages. The mortgages or debt obligations are pooled together and divided into tranches based on the maturity date and coupon payments and sold as securities (CDOs). If interest rates change and the borrowers in the underlying pools can refinance their debts, the CDOs will experience some volatility as the obligations are paid off early, but how much volatility depends on which tranche the investment is in. Continue reading...
What Is Economics?
Economics is a branch of social science that plays a pivotal role in understanding how societies allocate their resources to meet their diverse needs and desires. This complex field encompasses a wide range of topics, from individual decision-making to global economic systems. Let's delve into the world of economics by exploring its various dimensions, types, indicators, and systems. At its core, economics revolves around the study of how societies, organizations, and individuals manage limited resources to fulfill their unlimited wants and needs. It addresses the allocation of resources for the production, distribution, and consumption of goods and services. Continue reading...
What is the MSCI World?
The MSCI World is perhaps the most well regarded index for global stocks. The MSCI World Index is a global cap-weighted index that serves as a good barometer for stock and economic performance of the world as a whole. If you are a global investor, the MSCI World makes for a very useful benchmark for performance. The index is maintained by Morgan Stanley, and has over 1,600 stocks listed in it from all developed markets in the world. It does not include emerging markets or China. Continue reading...
What Are the Top 8 Most Tradable Currencies in Forex and Their Economic Drivers?
Dive into the forex market's heartbeat with our in-depth analysis of the top 8 tradable currencies. From the dominance of the U.S. dollar to the allure of the South African rand, each currency tells a story shaped by its central bank, economic policies, and global standing. Whether you're a seasoned trader or new to the forex scene, our guide offers valuable insights into the currencies that make the financial world go round. Uncover the intricacies of the forex giants and the nuances that drive their value. Get ready to trade with knowledge as your currency. Continue reading...
What are foreign deposits?
Foreign deposits are taken in by international branch locations of US-based banking institutions. Banks are not obligated to pay FDIC premiums on these deposits. Foreign deposits are placed by customers into a US-based bank branch which is located in international locations. Because it is outside of Federal jurisdiction, banks are not subject to the same capital reserve requirements and do not have to pay FDIC insurance on the deposits. Continue reading...
What is the EURO STOXX 50?
The EURO STOXX 50 is an index designed to give a broad representation of stock performance across the euro zone. The EURO STOXX 50 is an index comprised of the 50 largest and most liquid stocks in the euro zone, and is designed to “provide a blue-chip representation of Super-sector leaders in the Eurozone.” The performance of the EURO STOXX 50 is generally a good indicator for how Europe’s economy is doing. Continue reading...
What is a foreign institutional investor?
Institutional investors are corporations, banks, pension funds, mutual funds, and other forms of pooled capital which act as one entity to engage in securities transactions in the best interest of the constituents or company that they represent. Foreign Institutional Investors are those whose company is based in another country. Investments made on behalf of foreign companies, foreign financial institutions, and foreign funds (such as the foreign equivalent of hedge funds, mutual funds, and pension funds) are foreign institutional investments. There are usually reporting requirements for both the foreign government for the county in which the interests are held and for the domestic government of the institutional investor. Continue reading...
What is an Account Number?
An account number is a serialized identifier which is ascribed to a particular account holder or account at a financial institution, retailer, or other entity. Account numbers may include letters or numbers and may be of various length, but they usually exceed 5 characters. An account number is a way for a company or organization to uniquely identify the accounts associated with each individual customer. Continue reading...