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Saturday 15 October 2011
Monday 13 June 2011
guaranteed stock
Preferred or common stock of one corporation whose dividends are guaranteed by another corporation. Since the dividends are guaranteed, investors are generally willing to pay a higheramount for the stock than if the stock was not backed up by a guarantee. How valuable theactual guarantee is will depend on the guarantor's financial and credit history. The guaranteed stock arrangement has frequently been used by railroads.
Friday 10 June 2011
currency basket
A group of securities whose weighted average is used to determine the value of an obligation or the value of another currency. For instance, a country that does not peg the value of its currency to a single other currency, such as the U.S. dollar, could value its currency to the value of a currency basket comprised of Euros, U.S. dollars, and Japanese Yen.
letter of indemnity
A written undertaking by a third party (such as a bank orinsurance company), on behalf of one of the parties (thefirst party) to a transaction or contract, to cover the other party (the second party) against specific loss or damagearising out the action (or a failure to act) of the first party. Also called indemnity bond.
indemnity
Undertaking given to compensate for (or to provide protection against) injury, loss, incurred penalties, or from acontingent liability. A shipping company, for example, will ask for a bank's indemnity for releasing a shipment to a consignee who has lost original shipping documents. The bank in turn will require the consignee to sign acounter-indemnity before issuing its indemnity to the shipping company. This way the consignee gets therelease of shipment in completion of a transaction, and both the shipping company and the bank are protected in case some dispute arises out of that transaction. See also letter of indemnity.
European Exchange Rate Mechanism
ERM. A system created in 1979 as a way to reduce the volatility of the various Eurpoean currencies and to create a stable monetary system. The ERM created fixed margins in which a country's currency could operate. It was the predecessor of the European Economic and Monetary Union
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