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An example of a cap would be an agreement to receive a payment for each month the LIBOR rate exceeds 2.5%. Similarly, an interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price.
A take-or-pay contract, or a take-or-pay clause within a contract, is a payment obligation agreed between a business customer and its supplier. With this kind of contract, the customer either takes the product from the supplier or pays the supplier a penalty. For any product the company takes, it agrees to pay the supplier a certain price, say ...
In other words, a forward rate agreement (FRA) is a tailor-made, over-the-counter financial futures contract on short-term deposits. A FRA transaction is a contract between two parties to exchange payments on a deposit, called the Notional amount , to be determined on the basis of a short-term interest rate, referred to as the Reference rate ...
For a long position this payoff is: = For a short position, it is: f T = K − S T {\displaystyle f_{T}=K-S_{T}} Since the final value (at maturity) of a forward position depends on the spot price which will then be prevailing, this contract can be viewed, from a purely financial point of view, as "a bet on the future spot price" [ 3 ]
Loan agreements are documented via their commitment letters, agreements that reflect the understandings reached between the involved parties, a promissory note, and a collateral agreement (such as a mortgage or a personal guarantee). Loan agreements offered by regulated banks are different from those that are offered by finance companies in ...
A 1926 promissory note from the Imperial Bank of India, Rangoon, Burma for 20,000 rupees plus interest. A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the maker or issuer) promises in writing to pay a determinate sum of money to the other (the payee), either at a fixed or ...