If you are considering taking out a variable-rate loan, you may be wondering how to protect yourself from the risk of rising interest rates. One possible solution is to buy an interest rate cap, which is a type of interest rate derivative (IRD) contract that limits the maximum interest rate you have to pay on … Continue reading How Interest Rate Cap Works: An Intro for Floating Rate Borrowers
Category: Financial Instruments
Bonus Stripping vs Bond Washing
Bonus Stripping Bonus Stripping is practice of buying securities in advance of bonus securities record date (i.e. usually buying happens after bonus announcement but before record date) and selling original securities after ex-date thereby booking short term capital loss on original securities. Under Sec. 94(8) of Income tax act, this short-term capital loss will be … Continue reading Bonus Stripping vs Bond Washing
Will India introduce Water Derivatives?
As per today's ET edition (Sep 23, 2022), Niti Aayog is working on draft recommendations for introduction of water futures in India among others. Water futures, part of commodity derivatives, helps water users such as agriculturists, governments, water intensive sector players etc. in water price discovery and hedging price risk arising from climate change. Btw, Water … Continue reading Will India introduce Water Derivatives?
All about Sovereign Gold Bonds
SGBs are bonds issued by RBI on behalf of GOI. Here are few key features of SGBs: Who can Invest: Resident individuals, HUFs, Trusts, Universities and Charitable Institutions (max limit is up to 4 kgs per financial year in case of Individuals/HUFs and 20kg per FY in case of others). SGBs will be issued in … Continue reading All about Sovereign Gold Bonds
Do you consider ‘Yield to Call’ while investing in bonds/debentures?
You might hear Yield to Maturity (YTM), which is annual pre-tax rate of return (IRR) one would receive on a bond if it is held till its maturity (of course assuming Issuer of bond does not default on its obligations). Yield to Call (YTC) is slight variation of YTM, which is applicable in case of callable … Continue reading Do you consider ‘Yield to Call’ while investing in bonds/debentures?