Glossary

Debt at market

credit – or debt

In the investment world, Credit is used more or less interchangeably with debt. Thus credit markets and debt markets means much the same thing and a credit fund invests in debt in various forms. Credit is also a short hand term for corporate bonds, which are bonds issued by companies

Securitised Debt

Securitised debt is a form of structured finance. A portfolio of debt which is packaged together and then sold off in tranches. The highest ranking tranche (the one that gets repaid first) may be rated as AAA or equivalent; that is to say, in the opinion of a rating agency, the chances of losing money on the […]

Debt at fair value

Some companies borrow money with long maturities . The people who have lent the company this money know they can rely on a defined income until the loan matures. They could sell the debt on to someone else but, if the market rate of interest has changed since they lent the money, the debt is […]

Grading under review

Grading under review notices are issued by the Regulator for Social Housing on all Registered Providers than own 1,000 or more units. The following is an extract from a paper produced by the regulator. There are four governance grades: G1 The provider meets our governance requirements. G2 The provider meets our governance requirements but needs […]

Additional Tier 1 or AT1

Additional Tier 1 or AT1 In addition to a bank’s core capital or Tier 1 capital, it may also use other additional forms of capital to ensure its capital adequacy. Tier 1 capital is used to describe the capital adequacy of a bank and is the core capital that includes equity capital and disclosed reserves. […]

Core Capital

Core capital or Tier 1 capital is the reserves that a bank has to back its business activities. It composed of disclosed reserves and common stock/ordinary shares. It can also include non-cumulative, non-redeemable preferred stock. As well as core capital, banks also use instruments to accumulate Tier 1 capital, such as preference shares and CoCos. […]

Equity Discount Rate

Equity Discount Rate is the cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount rate is the interest rate used to determine the present value of future cash flows in standard discounted cash flow analysis. Subscribe for free equity research on investment trusts, funds and listed companies

Bobl, bund and schatz

Bobl Bobl is an acronym for bundesobligationen – debt issued by the German government. The acronym crops up in a futures contract used to trade medium-term German debt. The contract has a notional value of €100,000. On the Eurex exchange euro-bobl futures contracts exist for the months of March, June, September and December. The underlying […]

CoCos

CoCos are contingent convertible bonds issued typically by banks. They convert from debt to capital if a pre-determined event occurs and are a way of a bank shoring up its balance sheet in tough times. Click here to subscribe for free equity research on investment trusts, funds and listed companies.

Interest rate arbitrage or interest rate relative value

Interest rate arbitrage funds or interest rate relative value funds invest in debt and seek to profit from predicting moves in interest rates (yields). They are often market neutral and may be quite highly leveraged as they seek to exploit small changes in value.

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Glossary

Debt at market