One of the four types of compound options, this is a "put" option on an underlying "call" option. The buyer of a put on a call has the right but not the obligation to sell the underlying call option on the expiration date. This type of option is used when leverage is desired, and the trader is bearish on the underlying asset. The value of a put on a call changes in inverse proportion to the price of the underlying asset, i.e. it decreases as the asset price increases, and increases as the asset price decreases. Also known as a split-fee option. A put on a call has two strike prices and two expiration dates, one for the initial put option and the other for the underlying call option. Note that compound options are generally European-style exercise, which means that they can only be exercised on the expiration date. Since one of the variables that determines the cost of an option is the price of the underlying asset, the cost of a put on a call option will generally be much lower than the cost of a put on the corresponding asset. It can therefore provide a great deal of leverage to the options trader.
A model, named after the financial scholar Robert C. Merton, that was developed in the 1970s and is used today to evaluate the credit risk of a corporation's debt. Brokerage firm analysts and some investors employ the model in order to determine a company's ability to service its debt, meet its financial obligations and to gauge the overall possibility of credit default. Also referred to as, "Asset Value Model". |||Fischer Black and Myron Scholes utilized Merton's work to build out what has since become known as the Black-Scholes pricing model.Securities analysts and loan officers attempting to determine a company's credit fault risk will utilize the Merton Model as a means of analysis. The model allows the analysts to better value the company, as well as determine its ability to remain solvent through the analysis of reported debt amounts and maturity dates.
An option strategy: -Buy one put option contract with 90 days or more until expiration-Sell one put option contract (at the same strike price) with 45 days or less until expiration-In 45 days, sell another 45-day put option contract at the same strike price-Hold the long position until expiration if it appears that market will be profitable. Otherwise, sell it. Profits can be realized since the price decay of the 45-day contract declines at a faster rate than the long option. The difference in premium decays allows investors to make money on the spread. The inherent risk in this strategy arises if prices rise in the short term and then increase thereafter.
A note that is issued by Lending Club. The income from these notes is used to make loans to club members. Member Payment Dependent Notes, issued in 2008, had an initial maturity of just three years and four business days and accrued interest from the date of their issuance. Payments are made monthly, and the loans have no underwriters and therefore no discounts from underwriters. |||Member Payment Dependent Notes are highly speculative in nature and should only be purchased by aggressive investors who can absorb the loss of their entire investment. However, these notes also pay a very high rate of interest, ranging from about 7% to nearly 20%, depending upon various factors. Because of the lack of market for these notes during 2009, many investors purchasing this note were expected to hold the note to maturity.
The additional amount of service years that Canadian pensioners can purchase to go towards their pension account. Pensioners may purchase additional service time to cover service absences for reasons such as authorized leave without pay (including maternity or paternity leave), military service and long-term disability waiting period. Pensioners may make up for lost contributions to pension plans in the event that they spent a period of time working in a service for which they were not eligible to receive pension benefits. Often, the cost of the purchased service is equal to the required employee contributions for the period of service being purchased; in some cases, the costs are higher. Purchases of service can occur as a lump sum payment - by check, money order, or the direct transfer of funds from a Registered Retirement Savings Plan or other registered savings plan, or through payroll deductions, which would occur in addition to any regular pension contributions.
In the U.S., a form of financing that can be used by cities, counties and special districts (such as school districts) to finance major improvements and services within the particular district. Special taxes and bonds used for Mello-Roos financing can only be issued by counties or districts in which two-thirds of the voters in the area have voted in favor of becoming a Mello-Roos district. |||Mello-Roos districts may issue municipal bonds to finance development projects with high costs. If voters in the area have elected to become a Mello-Roos district, they are responsible for the repayment of these bonds through a special tax, assessed annually based on the value of the properties within the district. Mello-Roos financed developments might include schools, roads, libraries, police and fire protection services or ambulance services. This type of financing is named after Henry Mello and Mike Roos of the California legislature, who sponsored legislation in 1982 to authorize this form of financing.
A risk-management strategy that investors can use to guard against the loss of unrealized gains. The put option acts like an insurance policy - it costs money, which reduces the investor's potential gains from owning the security, but it also reduces his risk of losing money if the security declines in value. If an investor purchased a stock for $10 that is now worth $20 but he has not sold it, he has unrealized gains of $10. If he doesn't want to sell the stock yet (perhaps because he thinks it will appreciate further) but he wants to make sure he doesn't lose the $10 in unrealized gains, he can purchase a put option for that same stock (called the "underlying stock") that will protect him for as long as the option contract is in force. If the stock continues to increase in price, say, going up to $30, the investor can benefit from the increase. If the stock declines from $20 to $15 or even to $1, the investor is able to limit his losses because of the protective put.
1. A note that usually matures in five to 10 years. 2. A corporate note continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years. |||1. Notes range in maturity from one to 10 years. By knowing that a note is medium term, investors have an idea of what its maturity will be when they compare its price to that of other fixed-income securities. All else being equal, the coupon rate on medium-term notes will be higher than those achieved on short-term notes.2. This type of debt program is used by a company so it can have constant cash flows coming in from its debt issuance; it allows a company to tailor its debt issuance to meet its financing needs. Medium-term notes allow a company to register with the SEC only once, instead of every time for differing maturities.
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