ICB and Make whole clause: Difference between pages
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''US - securities'' | |||
A strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors. | |||
Under a make whole clause the borrower/issuer has to value the cash flows beyond the date of the early call/redemption at the US government bond yield. | |||
This potentially makes it prohibitively expensive for the issuer to take an early redemption. | |||
The consequence of a make whole clause for the investor is that they can re-invest the redemption monies in US government stock, thus preserving their originally expected cash inflows at lower risk. | |||
Make whole clauses are similar in their effect to Spens clauses. | |||
== See also == | == See also == | ||
* [[ | * [[Call risk]] | ||
* [[Clause]] | |||
* [[Security]] | |||
* [[Spens clause]] | |||
Revision as of 19:28, 4 September 2017
US - securities
A strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
Under a make whole clause the borrower/issuer has to value the cash flows beyond the date of the early call/redemption at the US government bond yield.
This potentially makes it prohibitively expensive for the issuer to take an early redemption.
The consequence of a make whole clause for the investor is that they can re-invest the redemption monies in US government stock, thus preserving their originally expected cash inflows at lower risk.
Make whole clauses are similar in their effect to Spens clauses.
