Arbitrage - Arbitrage involves the simultaneous purchase of a security in one market and the sale of it or a derivative product in another market to profit from price differentials between the two markets.

Bank Guarantees - (BG) these are instruments that are an absolute guarantee of payment from a financial institution that is listed in the bankers almanac. They are generally for one year, but can extend up to five years and without any coupons attached to them, therefore they are termed as a zero coupon instrument. These instruments are used everywhere in the world except for North America, where Standby letters of credit are used. In order to use them as credit, credit enhancement, or collateral the issuing institution should have an investment grade from Moody's, Standard & Poors or Fitch.

Bond - A long-term promissory note in which the issuer agrees to pay the owner the amount of the face value on a future date and to pay interest at a specified rate at regular intervals. This is basically a debt by a company which issues a document and promises to pay.

Certificate of Deposit - (CD) is a cash deposit into a financial institution that is usually for a term anywhere from one month to 5 years. The depositor receives a certificate that states the financial institution will irrevocably and unconditionally pay the principal and interest upon a certain date and time in the future. This is basically like cash, depending of course on the issuers' credit rating, which could make borrowing or cashing it difficult.

Credit Enhancement - this is a term used to help individuals, corporations or governments to borrow funds for specific projects including working capital. The form can take place with many different vehicles such as balance sheet enhancement using borrowed assets for specific periods of time, such as bonds, certificates of deposit, debentures, free trading stock from publicly traded entities, bank guarantees, standby letters of credit, medium term notes and GIC's.

Debenture - An unsecured bond backed solely by the general credit of a company.

Derivative - A generic term often applied to a wide variety of financial instruments that derive their cash flows, and therefore their value, by reference to an underlying asset, reference rate, or index. Examples are GINNI MAE, FANNIE MAE.

Documentary letters of credit - (DLC) these instruments are basically an absolute guarantee of payment for goods and/or services that the seller requests proof of payment, but the buyer needs assurance of delivery. The term can be from 30 days up to one year.

Due diligence – (DD) A thorough investigation of a company, undertaken by another company's underwriter and accounting firm.

Financial Indemnity Bonds - are purchased usually from top rated A+ insurers by AM Best to guarantee lower graded financial instruments (wrap) or funding projects to insure payment over a specified period of time. This takes major underwriting efforts and is expensive, usually costing up to 3% of the entire insured amount, and this is paid in front, before the policy is issued.

Guaranteed Investment Contract - (GIC) this is like an annuity or life product that has a specific term usually 10 years and is backed by an A+ rated or better insurance company that guarantees the entire principal. The borrower only has to make the interest payments. This product is not accessible by bankruptcy, creditors and is judgment proof. This product is very similar to the credit enhancement and is readily acceptable by most banking institutions as collateral and is easily borrowed against.

Medium term notes - (MTN) these are instruments that are underwritten by financial institutions generally listed in the bankers almanac, although can be issued by corporations that are underlying the guarantee with their own assets. The term is usually more than 2 years and can extend up to 30 years, but most common is ten years, with attached coupons of interest.

Standby letters of credit - (SBLC) are like bank guarantees which are usually issued for a term of one year that can be renewable from top US or Canadian financial institutions. They are an absolute guarantee of payment on the instrument immediately when presented to the issuer for payment.

Surety Performance bonds - are a form of a guarantee with stipulations as to an event or for events to take place, and then when the event does not happen, they step in to insure there will be funds to complete the project. These are instruments that are issued from top rated A+ insurers by AM Best.

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