Lenders Option Borrowers Option and Multicurrency one-country pooling: Difference between pages

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imported>Doug Williamson
(Layout.)
 
imported>Doug Williamson
(Linked to The Treasurers Handbook - Legal implications of cash pooling structures)
 
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(LOBO).
A cash management technique in which excess funds from companies’ accounts in the same country, which are denominated in different currencies, are concentrated and used to offset deficits for the purpose of determining interest earned or owed.
 
 
A long term borrowing instrument with periodic interest re-fixings, which incorporates two linked options:
 
#An option for the lender to set revised (usually higher) interest rates at predetermined interest reset dates - for example annually. This is the Lender's option.
#A linked option for the borrower (exercisable only if the Lender’s option is exercised) either to pay the revised interest rate, or else to redeem the bond. This is the Borrower’s option. 
 
 
LOBOs have been issued for maturities of up to 50 years.
 
Each of the two embedded options can be complex to value with precision, potentially making the composite borrowing instrument difficult for some less sophisticated borrowers to evaluate.
 
 
Also written 'Lender's Option Borrower's Option'.




== See also ==
== See also ==
* [[Option]]
* [[Cash concentration]]
* [[Cash management]]
* [[Deficit]]
* [[Pooling]]
* [[CertICM]]
* [[Legal implications of cash pooling structures]]

Revision as of 11:11, 1 December 2014

A cash management technique in which excess funds from companies’ accounts in the same country, which are denominated in different currencies, are concentrated and used to offset deficits for the purpose of determining interest earned or owed.


See also