Counter-indemnity and Embedded derivative: Difference between pages

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imported>Doug Williamson
(Note sometimes known as 'indemnity'.)
 
imported>Doug Williamson
(Remove surplus link.)
 
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A counter-indemnity is an obligation to make a reimbursement in relation to a primary indemnity, guarantee, bond or any similar arrangment.
A component of a hybrid security that is embedded in a non-derivative instrument.  


An embedded derivative can modify the cash flows of the host contract because the derivative can be related to an exchange rate, commodity price or some other variable which frequently changes.


For example, we may be a corporate supplier in a commercial contract.
As part of the contractual arrangements, our bank may issue a performance bond to our customer.
This gives rise to a contingent liability for our bank.
The bank will require a counter-indemnity from ourselves, in favour of the bank.
If the performance bond is called, we must indemnify the bank under the counter-indemnity.
A counter-indemnity is sometimes also known more simply as an 'indemnity'.


== See also ==
* [[Bifurcate]]
* [[Derivative instrument]]
* [[IFRS 9]]


== See also ==
[[Category:Accounting,_tax_and_regulation]]
* [[Bond]]
* [[Contingent liabilities]]
* [[Guarantee]]
* [[Indemnity]]
* [[Indemnity clause]]
* [[Multilateral netting]]
* [[Performance bond]]

Latest revision as of 17:51, 29 January 2022

A component of a hybrid security that is embedded in a non-derivative instrument.

An embedded derivative can modify the cash flows of the host contract because the derivative can be related to an exchange rate, commodity price or some other variable which frequently changes.


See also

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