Vous êtes sur la page 1sur 3

Financial instruments:

Debentures: A type of debt instrument that is not secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness and reputation of the issuer.
Both corporations and governments frequently issue this type of bond in order to secure
capital. Like other types of bonds, debentures are documented in an indenture. Debentures
have no collateral. Bond buyers generally purchase debentures based on the belief that the
bond issuer is unlikely to default on the repayment. An example of a government debenture
would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds
and T-bills are generally considered risk free because governments, at worst, can print off
more money or raise taxes to pay these types of debts.

Convertible debentures: A type of loan issued by a company that can be converted into
stock by the holder and, under certain circumstances, the issuer of the bond. By adding the
convertibility option the issuer pays a lower interest rate on the loan compared to if there
was no option to convert. These instruments are used by companies to obtain the capital
they need to grow or maintain the business.
Call money: Money loaned by a bank that must be repaid on demand. Unlike a term loan,
which has a set maturity and payment schedule, call money does not have to follow a fixed
schedule. Brokerages use call money as a short-term source of funding to cover margin
accounts or the purchase of securities. The funds can be obtained quickly. Brokerages know
that they are taking on risk by using funds that can be called at any time, so they typically
use call money for transactions that will be resolved quickly. If the bank recalls the funds
then the broker can issue a margin call on its clients in order to make the repayment. The
call money rate is used as the interest rate on the loans.
Commercial paper: Commercial paper is a money-market security issued (sold) by large
corporations to get money to meet short-term debt obligations (for example, payroll), and
is backed only by an issuing bank or corporation's promised to pay the face amount on the
maturity date specified on the note.
Certificate of Deposit: It is a savings certificate entitling the bearer to receive interest. A
CD bears a maturity date, a specified fixed interest rate and can be issued in any
denomination. CDs are generally issued by commercial banks and are insured by the FDIC.
The term of a CD generally ranges from one month to five years.
Indexed Bond: A bond in which payment of income on the principal is related to a specific
price index- often the Consumer Price Index. This feature provides protection to investors
by shielding them from changes in the underlying index. The bond's cash flows are adjusted
to ensure that the holder of the bond receives a known real rate of return.
An Equity-Linked Note (ELN) is a debt instrument, usually a bond that differs from a
standard fixed-income security in that the final payout is based on the return of the
underlying equity, which can be a single stock, basket of stocks, or an equity index.
Participatory notes are instruments used for making investments in the stock markets.
However, they are not used within the country. They are used outside India for making
investments in shares listed in the Indian stock market. That is why they are also called
offshore derivative instruments
Underwriter: An investment bank that acts as an intermediary between the issuing
company and the investors, who purchase the company's debt instruments and/or stock at
the Initial Public Offering (IPO). The underwriter buys the newly issued securities from the
company and sells them to investors on the secondary market through a stock exchange.
Insurance underwriters evaluate the risk and exposures of potential clients. They decide
how much coverage the client should receive, how much they should pay for it, or whether
even to accept the risk and insure them. Underwriting involves measuring risk exposure and
determining the premium that needs to be charged to insure that risk. The function of the
underwriter is to protect the company's book of business from risks that they feel will make
a loss and issue insurance policies at a premium that is commensurate with the exposure
presented by a risk.

Green Shoe Option: A provision contained in an underwriting agreement that gives the
underwriter the right to sell investors more shares than originally planned by the issuer.
This would normally be done if the demand for a security issue proves higher than
expected. It is legally referred to as an over-allotment option.
A green shoe option can provide additional price stability to a security issue because the
underwriter has the ability to increase supply and smooth out price fluctuations if demand
surges. Green shoe options typically allow underwriters to sell up to 15% more shares than
the original number set by the issuer, if demand conditions warrant such action. However,
some issuers prefer not to include green shoe options in their underwriting agreements
under certain circumstances, such as if the issuer wants to fund a specific project with a
fixed amount of cost and does not want more capital than it originally sought.

The term is derived from the fact that the Green Shoe Company was the first to issue this
type of option.

Participating policy is an insurance contract that pays dividends to the policy holder.
Dividends are generated from the profits of the insurance company that sold the policy and
are typically paid out on an annual basis over the life of the policy. Most policies also include
a final or terminal payment that is paid out to the holder when the contract matures. Some
participating policies may include a guaranteed dividend amount, which is determined at the
onset of the policy.

A Third Party Administrator (TPA) is an organization that processes insurance claims or
certain aspects of employee benefit plans for a separate entity. This can be viewed as
"outsourcing" the administration of the claims processing.