1. Collateralized Loan Obligation (CLO): Definition 2. Types of Collateralized Loan Obligations (CLOs) How does a CLO make money? A CLO is a type of collateralized loan obligation. A CLO is a pool of loans that are bundled together and sold to investors. The loans are typically junk bonds, which are bonds that are rated … Read more
Types, Features, Examples. What are cash equivalents? Types: Features: Examples: Are debtors cash equivalents? Debtors are not cash equivalents. Cash equivalents are short-term, highly liquid investments that are easily converted to cash. Debtors are not as liquid as cash equivalents and may take longer to convert to cash. How many types of cash are there? … Read more
What does the CBOE Volatility Index (VIX) measure in investing? Is a high volatility good? There is no simple answer to this question as it depends on the circumstances and goals of the trader. In general, high volatility can be seen as both good and bad for traders. On the one hand, high volatility can … Read more
When an entity borrows or lends in a foreign currency, it is exposed to fluctuations in the exchange rate. If the entity enters into a forward rate agreement (FRA), it can hedge this exposure. The FRA is a contract between two parties to exchange a set amount of cash at a specified future date, based … Read more
A swap is a type of derivative contract through which two parties agree to exchange one asset for another asset, usually at a specified date in the future. Swaps can be used to hedge against risk or to speculate on the movement of an underlying asset. To calculate gains on a swap, we first need … Read more
A credit default swap (CDS) is a financial contract that enables the buyer to protect themselves against the risk of default on a debt instrument, usually a bond. The buyer pays a premium to the seller in exchange for this protection, and if the underlying instrument defaults, the seller pays the buyer the face value … Read more
Asset-Backed Security: What It Is and How It Works What are covered assets? In the context of trading, covered assets refer to those assets which are used as collateral to secure a loan or line of credit. In most cases, the asset used as collateral is a security, such as stocks, bonds, or ETFs. The … Read more
A collateralized debt obligation (CDO) is a type of structured finance product that repackages and transforms a pool of assets into a new security. The pool of assets is typically made up of debt obligations, such as bonds or loans. The new security created by the CDO is then sold to investors. The cash flows … Read more
Derivative Warrants: Types and Example. What is a warrant in trading? A warrant is a security that gives the holder the right to buy or sell a underlying security at a specified price within a certain time period. Warrants are often issued by companies as a way to raise capital, and they are usually traded … Read more
How does arbitrage work in investing? What is the importance of arbitrage? Arbitrage is an important concept in the financial world because it helps to ensure that prices are efficient. Arbitrageurs are market participants who buy and sell securities in order to profit from price differences in different markets. By doing so, they help to … Read more
