Category: Instruments

Bonds are issued in much the same way as a public issue of shares. A lead manager will prepare a prospectus strike the price and arrange for placement. Generally, an investment bank will advise. Larger issuers may issue their bonds in outside their home jurisdiction. An investment or merchant bank may act as lead manager […]

A trust may be and commonly is used in bond transactions. The trust deed protects the interest of the investor. The trust is commonly required, but not mandatory.  The investors are beneficiaries under the trust, in this case. The trust company is usually a trust corporation.  In monitoring the issue its role is passive rather […]

Bonds, commercial paper, medium term notes and certificate of deposits are of the same broad legal nature and format. There is a certificate or document of title by which the issuer or debtor promises to pay the bearer a specified amounts of money on a specified state. A bond when used in the context of […]

Convertible bonds give the holder the option to convert the bond into another security.  This may be debt or share capital of the issuer company or of a guarantor.  Most commonly the conversion is to equity. The option allows the holder to subscribe for debt or equity in the issuer company.  The bond is surrendered […]

The following are debt instruments with shorter maturities, generally, than bonds. commercial papers, certificates of deposit, medium-term notes, acceptance credits. Each are bearer securities negotiable by delivery.  They are all debentures or acknowledgements of indebtedness in a wider sense. Acceptance credit facilities may provide short term finance through acceptance of eligible bills.  Bills are bills […]

The Asset Covered Securities Act 2001 to 2007 allows the issue by designated institutions of mortgage-backed securities. The legislation avoids the need for the creation of such securities by use of somewhat artificial elaborate structures in the manner set out in a separate chapter. The legislation does not cover all issuers.  It applies to designated […]

Derivatives are financial products or assets whose value is indirectly derived from an underlying product or asset.  The main types of financial derivatives are swaps, options, and future.  Swaps involve one party exchanging an obligation for another.  Interest rates and r currencies are commonly the subject of swaps. Options entitle a buyer to sell or […]

The so-called over-the-counter derivatives market is significant.  The value of derivative transaction runs to trillions of euro and dollars etc. many times the value of the entire economy of the world.  They represent a mechanism for risk management and exchange of payment profiles in terms of risk and credit exposure. Derivatives have been criticised for […]

A number of types of risks are often identified in the context of derivatives.  Credit risk is the risk that the counterparty will not pay when due.  In the case of exchange traded derivatives, a clearinghouse may provide a guarantee for trades of its members.  There has been a move towards requiring use of clearinghouses […]