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7 Cards in this Set
- Front
- Back
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Callable bonds |
Issuer has right to repay early These costs the issuer more (i.e., the buyer demands higher interest rate) It reveals that the issuer is confident it can repay early |
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putable bonds |
Buyer has the right to demand early repayment Buyer will accept a lower interest rate Gives the issuer an incentive to perform well |
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convertible bonds |
Buyer has choice of cash repayment and newly-issued shares Signal: issuing just equity gives the market less confident (typically equity is a last resort) |
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What is a forward rate? |
It is an agreement today to do a transaction in the future |
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Formula for forward rate |
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Why do CRAs exist? |
Reduce asymmetric information about issuers that investors face when making investments enhancing market liquidity |
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Alan's depiction of securitization |
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