Business is war.
A confirmed letter of credit is a way for banks to guarantee payments in international trade deals. It’s an extra layer of security on top of a regular letter of credit. With a confirmed letter of credit, a second bank steps up and says, “We’ve got your back.” They promise to pay the seller (the…
Let’s say you want to know something about a big group of things or people. Maybe how much money people make on average in a country. You can’t go asking every single person – no way! That’d take forever. What do you do then? You pick a smaller bunch of people, just a snippet of…
A conduit is a unique company or trust made to buy assets. The assets are for securitization or asset-backed commercial paper (ABCP). Sometimes, a private company like a bank or securities firm makes the conduit. They are called the sponsor. Sometimes, the government makes the conduit, too. The sponsor sells or gives assets to the…
A conditional put convertible bond is a special kind of bond. It’s a bond that can change into something else – stock shares in the company that gave out the bond. That’s why it’s called a “convertible” bond. The “conditional put” part means the person who owns the bond can choose to sell it back…
Conditional Prepayment Rate, or CPR for short, is a percentage rate used in the investing world. It pertains to some special types of investments called mortgage-backed securities and collateralized mortgage obligations. Those are fancy names, but all they really mean is bundles of home loans that are packaged and sold to investors. See, when people…
Facultative reinsurance is a type of reinsurance. Reinsurance is insurance for insurance companies. With facultative reinsurance, an insurance company buys reinsurance for individual insurance policies one at a time. This is different from treaty reinsurance, where an insurance company has an agreement with a reinsurance company to reinsure many insurance policies automatically. How facultative reinsurance…
Insurance companies buy special insurance for themselves. They call this reinsurance. Reinsurance protects insurance companies if they have to pay a lot to the people and businesses they insure. Insurance companies and reinsurance companies make deals called reinsurance contracts. The reinsurance contracts say what the insurance and reinsurance companies must do. The contracts also say…
A concert party is a group of speculators who work together to buy a lot of common stock in a company without attracting much attention. They do this because they want to take over the company. Sometimes this is legal, and sometimes it is not. Legal Concert Parties When a concert party wants to take…
Concentration risk is the chance of losing money because you have put too much of your wealth into one asset or market. Concentrating your investments like this can lead to significant losses if something terrible happens to that asset or market. Concentration risk usually comes from having a massive position in a single asset. This…
Compulsory liquidation happens when a court orders a company to shut down and sell everything it owns. This usually occurs because the company can’t pay its debts. The court steps in and makes sure everything is done correctly and fairly. Unlike when company owners choose to close their business, compulsory liquidation comes from outside pressure….
