Credit note (CLN) is a financial instrument that allows the issuer to transfer certain credit risks to credit investors.
A credit default swap is a derivative financial instrument or contract that allows issuers of credit-linked bonds to pass or “pass” their credit risk onto another investor.
Issuers of credit notes use them to hedge the risk of a particular credit event that could result in a loss of money, such as when a borrower defaults on a loan.
Investors who buy credit-linked bonds generally receive higher bond yields in exchange for taking on certain credit risks.
Average life is the average length of time it takes to pay off the outstanding principal on a debt instrument, such as a treasury bill, bond, loan, or mortgage-backed security.
A normal yield curve is a yield curve in which short-term debt instruments have a lower yield than long-term debt instruments of the same credit quality.
Realized yield is the actual profit earned during the investment’s holding period and may include dividends, interest payments, and other cash payments.
Revolving debt with a variable coupon is repaid every week, with the principal reinvested at a new interest rate, which is reset at a fixed spread relative to the base rate.