Business Jargons

Definition: A Swap is a financial agreement wherein the parties agree to trade cash flows over a period of time. It is the portfolio of a forward contract that involves multiple exchanges over a period of time while the forward contract involves a single transaction at a specific future date. The swaps are the highly liquid financial derivatives and have the following … [Read more...] about Risk Hedging with Swaps

Definition: The Future Contracts are the standardized Forward Contracts wherein two parties mutually decide to sell or buy the underlying asset at a predefined future date and at a price locked today. These are considered as a less risky alternative of hedging against the currency market fluctuations. If the future contracts are the forward contracts, then why it is … [Read more...] about Difference Between Forward Contracts and Future Contracts

Definition: The Future Contract is a standardized forward contract between two parties wherein they agree to buy or sell the underlying asset at a predefined date in the future and at a price specified today. The future contracts are a relatively less risky alternative of hedging against the fluctuations in the currency market. The parties to the currency future contracts … [Read more...] about Risk Hedging with Future Contracts

Definition: The Forward Contract is an agreement between two parties wherein they agree to buy or sell the underlying asset at a predetermined future date and a price specified today. The Forward contracts are the most common way of hedging the foreign currency risk. The foreign exchange refers to the conversion of one currency into another, and while dealing in the … [Read more...] about Risk Hedging with Forward Contracts

Definition: The Hedging is a financial technique that helps to reduce or mitigate the effects of measurable type of risk from the future changes in the fair value of commodities, cash flows, securities, currencies, assets and liabilities. It is a kind of an insurance that do not eliminate the risk completely but mitigate its effect. In other words, it is a risk-reducing tool … [Read more...] about Hedging

Definition: The Executive Compensation refers to the financial payment and other non-monetary rewards given to the top executives in exchange for their services to the organization. In other words, the executive compensation is the remuneration package given to the higher management of the firm for their work on the behalf of the organization. The kind of employees that are … [Read more...] about Executive Compensation

Definition: The Black-Scholes Model is the options pricing model developed by Fischer Black, Myron Scholes, and Robert Merton, wherein the formula is used to calculate the theoretical price of the European call and put option based on five determinants: Stock price, strike price, volatility, expiration date and the risk-free interest rate. The formula to calculate the price … [Read more...] about Black Scholes Model

Definition: The Employee stock option scheme or ESOs is the form of executive compensation, wherein the selected executives are given a certain number of shares of the firm. Here, the employees have the right, but not the obligation to buy or sell the company’s shares at a specific date and at a specific time. The companies listed on the securities exchange must comply with … [Read more...] about SEBI Guidelines on Employee Stock Option Scheme

Definition: Hybrid Financing is the financial instrument that partakes some characteristics of debt and some characteristics of equity. Simply, it is the financial security that possesses the characteristics of both the debt and equity. The debt and equity are the two extreme points and in the midpoint lies the hybrid financing that offers the investors the benefits of both … [Read more...] about Hybrid Financing

Definition: The Convertible Debentures are a type of loan that can be converted into the stock of the company after a stipulated time period at the option of the holder or the issuer in special circumstances. These are issued with the intent to raise money to expand or maintain the business operations at a considerable low-interest rate. The debentures are the long-term debt … [Read more...] about Convertible Debentures