Buying an asset is not always the only expense involved in holding it. The owner may also pay interest, storage charges, insurance or other costs until the asset is sold. Together, these expenses are known as the Cost of Carry. The concept is especially useful for understanding why the futures price of an asset may […]

Imagine wanting to make your first investment. You have the money, you know what you want to buy, but then comes the paperwork: forms, signatures, KYC documents and a visit to the bank. For many first-time investors, opening a Demat account can seem like the most complicated part of getting started. Today, however, this process […]

A bond usually pays interest and returns the principal on maturity. But some bonds can change their form when the issuing bank runs into financial trouble. Contingent Convertible Bonds, commonly called CoCo bonds, are built for such situations. They can absorb losses by converting into shares or by reducing the amount owed to investors. Key […]

A company may know that it will need a loan three months from now. What it may not know is the interest rate available on that date. A Forward rate agreement helps manage this uncertainty. It allows two parties to decide an interest rate today for a borrowing or lending period that begins later. Key […]

A security may display two prices at the same time. One shows what a buyer is ready to pay, while the other shows what a seller expects to receive. The gap between these prices is called the Bid-Ask spread. It may look small, but it affects trading cost, liquidity and the price at which a […]

When Meera cleared out her father’s cupboard last year, she found a folder of share certificates from the 1980s. Two of them spelled his name differently. Back then, fixing that had taken him months of affidavits and trips to a registrar’s office in another city. Meera bought her first corporate bond in June. It appeared […]

A hedge is meant to reduce uncertainty, but it may not remove every part of the risk. Sometimes, the asset being protected and the instrument used for protection do not move in exactly the same way. The remaining mismatch is known as Basis Risk. It is commonly seen in commodity futures, bond hedging, banking and […]

Financial institutions receive money from one side and deploy it on the other. A bank may accept short-term deposits but offer long-term loans. An insurer may collect premiums today and settle claims years later. Asset and Liability Management helps such institutions plan these cash flows, manage risk and remain prepared when market conditions change. Key […]

Prices shown in financial markets do not always refer to the same point in time. One may apply to a transaction happening now, while another may relate to a future date. The Spot Price is the current cash-market value of an asset. It helps investors understand what a share, commodity, currency or bond is worth […]