Definition of Subordination clause

Subordination clause

A provision in a bond indenture that restricts the issuer's future borrowing by
subordinating the new lender's claims on the firm to those of the existing bond holders.

Inflation-escalator clause

A clause in a contract providing for increases or decreases in inflation based on
fluctuations in the cost of living, production costs, and so forth.

Multicurrency clause

Such a clause on a Euro loan permits the borrower to switch from one currency to
another currency on a rollover date.

Negative pledge clause

A bond covenant that requires the borrower to grant lenders a lien equivalent to any
liens that may be granted in the future to any other currently unsecured lenders.

Incontestable Clause

This clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prevented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy.

Suicide Clause

Generally, a suicide clause in a regular life insurance policy provides for voiding the contract of insurance if the life insured commits suicide within two years of the date of issue of the coverage.

Acceleration Clause

clause causing repayment of a debt, if specified events occur or are not met.

Inflation

The rate at which the general level of prices for goods and services is rising.

Inflation risk

Also called purchasing-power risk, the risk that changes in the real return the investor will
realize after adjusting for inflation will be negative.

Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.

Multicurrency loans

Give the borrower the possibility of drawing a loan in different currencies.

inflation

Rate at which prices as a whole are increasing.

Cost-Push Inflation

inflation whose initial cause is cost increases rather than excess demand. See also demand-pull inflation.

Demand-Pull Inflation

inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.

Disinflation

A reduction in the rate of inflation.

Hyperinflation

Extremely high inflation.

Inflation

A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level.

Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.

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