SHOP

A bond with an added feature where the holder/owner of the bond has the option to exchange the bond for a specific number of shares of the company’s common stock at a future date. The price at which the bond will be converted and the conversion ratio is determined at…

Conventional Mortgages are non-government guaranteed mortgages.

The rate of interest (or exchange) to serve as the basis of a cash settlement on a forward contract or an option contract. More precisely, the difference between the contract rate and the reference rate serves as the basis of the cash settlement.

Arrangement entered into, before an event occurs which would trigger losses exceeding a certain threshold, giving the company the flexibility to raise capital by issuing securities or borrowing money to cover those losses. Generally a fee is paid by the company to the party who agrees to advance the funds.

Conforming loans meet FNMA and FHLMC eligibility requirements. Among the requirements that are necessary to qualify as a conforming loan, the two most important are: maximum loan size, which changes every year and minimum loan to value ratio, also subject to change. Use of property and payment to income ratio…

The rate of return earned on an investment when all of the cash flows received over a given time period are reinvested. The rate takes into account earning interest on interest.

When an initial investment earns interest, the newly earned interest also begins to earn interest. It may be thought of as earning interest on interest. May also be referred to as the effective rate.

A situation in which one country (or firm) can produced a good (or engage in a borrowing) at less cost than another country (or firm) in the special sense that it must sacrifice less of an alternative good to achieve production. The term is associated with the Theory of Comparative…

A tranche of a CMO, companion classes absorb the excess cash flow generated by faster prepayments so that the other tranches in the structure, such as PACs and TACs have more stable cash flows. Further, when prepayments are slow, the companion classes will extend so that the PACs and TACs…

Swaps that are structured to convert floating-prices paid (or received) for commodities to fixed prices, or vice versa. These swaps have a similar structure to interest-rate swaps.

Short-term corporate IOUs often used as part of a rollover strategy to obtain long-term financing at lower cost. Often called paper and sometimes denoted CP. May be placed directly or through commercial paper dealers. May be used as an index for leg of a swap.

Known as a CMO or REMIC (Real Estate Mortgage Investment Conduit). A structure which allows issuers to carve the cash flows of the underlying pass-through securities into various classes or tranches having different investment characteristics.