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Reinsurer |
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Definition of ReinsurerReinsurerAn insurance company that accepts the risk transferred from another insurance company in a reinsurance transaction.
Related Terms:Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. Basis riskThe uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for Blue-chip companyLarge and creditworthy company. Business riskThe risk that the cash flow of an issuer will be impaired because of adverse economic Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Cash transactionA transaction where exchange is immediate, as contrasted to a forward contract, which Coinsurance effectRefers to the fact that the merger of two firms decreases the probability of default on Commercial riskThe risk that a foreign debtor will be unable to pay its debts because of business events, Company-specific riskRelated: Unsystematic risk Completion riskThe risk that a project will not be brought into operation successfully. Cost company arrangementArrangement whereby the shareholders of a project receive output free of Counterparty riskThe risk that the other party to an agreement will default. In an options contract, the risk Country financial riskThe ability of the national economy to generate enough foreign exchange to meet Country risk GeneralLevel of political and economic uncertainty in a country affecting the value of loans or Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Cross-border riskRefers to the volatility of returns on international investments caused by events associated Currency riskRelated: Exchange rate risk Currency risk sharingAn agreement by the parties to a transaction to share the currency risk associated with Default riskAlso referred to as credit risk (as gauged by commercial rating companies), the risk that an Depository Trust Company (DTC)DTC is a user-owned securities depository which accepts deposits of Diversifiable riskRelated: unsystematic risk. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Equilibrium market price of riskThe slope of the capital market line (CML). Since the CML represents the Event riskThe risk that the ability of an issuer to make interest and principal payments will change because Exchange rate riskAlso called currency risk, the risk of an investment's value changing because of currency Exchange riskThe variability of a firm's value that results from unexpected exchange rate changes or the Fallout riskA type of mortgage pipeline risk that is generally created when the terms of the loan to be Federal Deposit Insurance Corporation (FDIC)A federal institution that insures bank deposits. Financial riskThe risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Firm-specific riskSee:diversifiable risk or unsystematic risk. Flat price riskTaking a position either long or short that does not involve spreading. Force majeure riskThe risk that there will be an interruption of operations for a prolonged period after a Foreign exchange riskThe risk that a long or short position in a foreign currency might have to be closed out Funding riskRelated: interest rate risk Geographic riskrisk that arises when an issuer has policies concentrated within certain geographic areas, Going-private transactionsPublicly owned stock in a firm is replaced with complete equity ownership by a Guaranteed insurance contractA contract promising a stated nominal interest rate over some specific time Herstatt riskThe risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk. Highly leveraged transaction (HLT)Bank loan to a highly leveraged firm. Holding companyA corporation that owns enough voting stock in another firm to control management and Idiosyncratic RiskUnsystematic risk or risk that is uncorrelated to the overall market risk. In other words, Inflation riskAlso called purchasing-power risk, the risk that changes in the real return the investor will Insolvency riskThe risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk. Insurance principleThe law of averages. The average outcome for many independent trials of an experiment Intercompany loanLoan made by one unit of a corporation to another unit of the same corporation. Intercompany transactiontransaction carried out between two units of the same corporation. Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Liquidity riskThe risk that arises from the difficulty of selling an asset. It can be thought of as the difference Market price of riskA measure of the extra return, or risk premium, that investors demand to bear risk. The Market riskrisk that cannot be diversified away. Related: systematic risk Mortgage-pipeline riskThe risk associated with taking applications from prospective mortgage borrowers Nondiversifiable riskrisk that cannot be eliminated by diversification. Nonsystematic riskNonmarket or firm-specific risk factors that can be eliminated by diversification. Also Operating riskThe inherent or fundamental risk of a firm, without regard to financial risk. The risk that is Overnight delivery riskA risk brought about because differences in time zones between settlement centers Political riskPossibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of Portfolio insuranceA strategy using a leveraged portfolio in the underlying stock to create a synthetic put Price riskThe risk that the value of a security (or a portfolio) will decline in the future. Or, a type of Product riskA type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or Purchasing-power riskRelated: inflation risk Rate riskIn banking, the risk that profits may decline or losses occur because a rise in interest rates forces up Regulatory pricing riskrisk that arises when regulators restrict the premium rates that insurance companies Reinvestment riskThe risk that proceeds received in the future will have to be reinvested at a lower potential Residual riskRelated: unsystematic risk Reverse price riskA type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an RiskTypically defined as the standard deviation of the return on total investment. Degree of uncertainty of Risk-adjusted profitabilityA probability used to determine a "sure" expected value (sometimes called a Risk arbitrageSpeculation on perceived mispriced securities, usually in connection with merger and Risk averseA risk-averse investor is one who, when faced with two investments with the same expected Risk classesGroups of projects that have approximately the same amount of risk. Risk controlled arbitrageA self-funding, self-hedged series of transactions that generally utilize mortgage Risk indexesCategories of risk used to calculate fundamental beta, including (1) market variability, (2) Risk loverA person willing to accept lower expected returns on prospects with higher amounts of risk. Risk managementThe process of identifying and evaluating risks and selecting and managing techniques to Risk neutralInsensitive to risk. Risk proneWilling to pay money to transfer risk from others. Risk premiumThe reward for holding the risky market portfolio rather than the risk-free asset. The spread Risk premium approachThe most common approach for tactical asset allocation to determine the relative Riskless rateThe rate earned on a riskless investment, typically the rate earned on the 90-day U.S. Treasury Bill. Riskless rate of returnThe rate earned on a riskless asset. Riskless arbitrageThe simultaneous purchase and sale of the same asset to yield a profit. Riskless or risk-free assetAn asset whose future return is known today with certainty. The risk free asset is Risky assetAn asset whose future return is uncertain. Risk-adjustedreturn Return earned on an asset normalized for the amount of risk associated with that asset. Risk-free assetAn asset whose future return is known today with certainty. Risk-free rateThe rate earned on a riskless asset. Round-trip transactions costsCosts of completing a transaction, including commissions, market impact Shortfall riskThe risk of falling short of any investment target. Sovereign riskThe risk that a central bank will impose foreign exchange regulations that will reduce or Specific riskSee:unique risk. Structured arbitrage transactionA self-funding, self-hedged series of transactions that usually utilize Systematic riskAlso called undiversifiable risk or market risk, the minimum level of risk that can be Systematic risk principleOnly the systematic portion of risk matters in large, well-diversified portfolios. Taxable transactionAny transaction that is not tax-free to the parties involved, such as a taxable acquisition. Term life insuranceA contract that provides a death benefit but no cash build-up or investment component. Term insuranceProvides a death benefit only, no build-up of cash value. Transaction exposurerisk to a firm with known future cash flows in a foreign currency that arises from Transactions costsThe time, effort, and money necessary, including such things as commission fees and the Transaction loanA loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |