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Finance: What is a Dual Currency Bond? 33 Views
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Description:
What is a Dual Currency Bond? Multinational corporations often find their books filled with foreign currencies from countries where they have businesses and have established their brand. One way in which they utilize some of these currencies is to enact securities underwriting that allows them to circulate interest payments in a different currency than repayment of principal. These hybrid securities are called Dual Currency Bonds. Due to the added foreign exchange risk to prospective bondholders, interest rates are usually higher than comparable single currency bonds from the same issuer.
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Transcript
- 00:00
Finance allah shmoop what is a dual currency bond Well
- 00:07
a currency duel would be way cooler to bonds One
- 00:12
dusty road in the wild west a saloon a gal
- 00:15
and a gun plan retired or called are paid whatever
- 00:21
they call bonds when they're dead Anyway a duel currency
Full Transcript
- 00:24
bond is a bond where the principal and the interest
- 00:27
payments are made in different currencies like here's a bond
- 00:30
whose principal is paid off in u s dollars But
- 00:33
its interest is paid in euros and yeah whatever currency
- 00:38
being used for interest payments is called the base currency
- 00:42
Well why would you the investor of want one of
- 00:44
these things Well dual currency bonds or subject to exchange
- 00:48
rate risk In other words you're making a gamble not
- 00:51
just on an investment but on which way the exchange
- 00:55
rate will bounce That is if you own something it's
- 00:58
highly exposed two euros while then you're kind of making
- 01:01
a bet that the relative to the dollar the euro
- 01:03
zehr gonna appreciate mohr like the government's printing less of
- 01:07
them You have less inflation whatever because then if that
- 01:10
repayment currency appreciates well boom you're more in the money
- 01:14
Than just the interest you collected And if that currency
- 01:17
doesn't appreciate well there's always bank robbery is a last 00:01:21.189 --> [endTime] resort dual currency dueling currencies No
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