Definition Core satellite investing is a hybrid investment strategy that aims to balance stability and growth by combining a foundation of core investments with a selection of satellite investments. The core typically consists of low-cost, diversified index funds or bonds that provide steady returns, while the satellites may include actively managed funds, individual stocks or other alternative assets aimed at capturing higher returns.
Components of Core Satellite Investing Core Portfolio: This is the backbone of the investment strategy, usually composed of index funds or ETFs that track the overall market.
Definition Corporate alliances refer to partnerships formed between two or more companies to achieve mutual benefits that they could not easily achieve independently. These alliances allow firms to share resources, knowledge and capabilities, ultimately enhancing their competitive positions in the marketplace.
Components of Corporate Alliances Shared Resources: Companies often pool resources, whether they are financial, technological or human capital, to create synergies.
Risk Sharing: Collaborating allows companies to share the risks associated with new ventures, research and development or entering new markets.
Definition Corporate bond issuance refers to the process by which companies raise capital by selling bonds to investors. These bonds are essentially loans from the investors to the company, which promises to pay back the principal amount at maturity along with periodic interest payments known as coupon payments. This method of financing is popular among corporations looking to fund projects, refinance existing debt or manage cash flow.
Components of Corporate Bond Issuance Principal: The original sum of money borrowed, which must be repaid upon maturity.
Definition Corporate valuation is the process of determining the economic value of a business or its assets. This is crucial for various stakeholders, including investors, management and potential buyers. A thorough corporate valuation provides insights into a company’s financial health, its growth potential and competitive position in the market.
Key Components of Corporate Valuation Financial Statements: These are essential documents that reflect a company’s performance over a specific period. The balance sheet, income statement and cash flow statement are critical in understanding a company’s financial position.
Definition Cost of Capital is a financial metric that represents the return rate that a company must earn on its investments to satisfy its investors, be they equity holders or debt holders. It serves as a critical benchmark for evaluating investment opportunities and business projects.
In simpler terms, it is the cost of financing a business through debt and equity and it reflects the risk associated with the investment. The Cost of Capital is often expressed as a percentage and is used to determine whether an investment will yield a satisfactory return.
Definition The coupon rate is a crucial concept in finance, particularly in the realm of fixed-income securities like bonds. Simply put, the coupon rate is the annual interest payment made by a bond issuer to bondholders, expressed as a percentage of the bond’s face value. For example, if you hold a bond with a face value of $1,000 and a coupon rate of 5%, you receive $50 each year until the bond matures.
Definition The Covered Call Strategy is a popular investment technique where an investor holds a long position in an asset, such as stocks and simultaneously sells call options on that same asset. This method allows investors to generate additional income from the premiums received from selling the call options while maintaining ownership of the underlying asset.
Components of the Covered Call Strategy Long Position: The investor must own the underlying asset, like shares of a stock, to implement a covered call strategy.
Definition The CRB Commodity Index or the Commodity Research Bureau Index, is a crucial indicator in the financial world that tracks a diverse range of commodity prices. It is designed to provide a comprehensive snapshot of the performance of various commodities, which can include everything from energy products like crude oil to agricultural goods like wheat.
Components of the CRB Commodity Index The CRB Commodity Index is made up of 19 different commodities, each representing a segment of the market.
Definition Credit Default Swaps (CDS) are financial derivatives that allow an investor to “swap” or transfer the credit risk of a borrower to another party. In simpler terms, they are like insurance policies against the default of a borrower. The buyer of a CDS pays a premium to the seller, who in return agrees to compensate the buyer in the event of a default or other specified credit event related to the underlying asset.
Definition Credit Rating Agencies (CRAs) are independent firms that evaluate the creditworthiness of various entities, including corporations, governments and financial instruments. They assign ratings that indicate the likelihood of an issuer defaulting on its debt obligations. These ratings are crucial for investors as they provide insights into the risk associated with investments.
Types of Credit Ratings There are several types of credit ratings, each serving a unique purpose:
Investment-Grade Ratings: These ratings suggest that the issuer has a low risk of default.