Guide to Analysing Companies

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United States, sub-prime lending is big business; some large fi-
nancial institutions do little else. In most other countries, when
a bank says “no”, a borrower has few other options.
Supplier credit
A loan to an importer guaranteed by the export-credit
agency of the country of the exporter.
Surrender value
What the holder receives when a fixed-term investment (such as
a life insurance policy) is cashed in before the end of the
term. If they need the cash, most holders are better off selling
the policy in the secondary market than surrendering it.
Suspense account
A sort of dustbin account into which payments are shunted
temporarily while in transit from one financial institution to
another, or when there is doubt about their rightful destination. 
Swap
A transaction in which two parties exchange assets or entitle-
ments to income. The two most common types of swaps are as
follows.
 Currency swaps, which originated as a way of avoiding
exchange controls in different countries but have
since developed into yet another way for financial
institutions to borrow in different markets. Institutions
simply sell each other amounts in different currencies
and re-exchange the principal when the loans
mature.
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 Interest-rate swaps, where counterparties agree to
exchange periodic interest payments on loans or
bonds. This enables them artificially to extend or
shorten the duration of their investment (that is, the
relationship of a bond’s price to its yield). This, in turn,
helps to balance the risk to which the institution may be
exposed. 
Swaption
An option to swap. A payer swaption gives the buyer the
right, but not the obligation, to enter into an interest-rate
swap at a predetermined rate on a future date. The buyer pays
the seller a premium for this right. A receiver swaption gives
the buyer the right to receive certain fixed payments. The seller
agrees to provide the swap if called upon to do so, thus giving
the buyer a form of insurance.
Syndicate
A group of institutions or individuals that get together to do
something that each could neither afford to do on their own nor
contemplate individually because of the risk. So a syndicate of
investment banks might get together to underwrite a new
issue of securities; or a syndicate of banks might get to-
gether to make a multimillion-dollar loan to a developing
country (a syndicated loan); or a group of lloyd’s names
might join forces as part of a syndicate to underwrite insur-
ance risks. In all cases, the legal agreements that bind them to-
gether and set out what happens if it everything goes wrong are
both voluminous and onerous.