What Is a Red Clause Letter Of Credit? A red clause letter of credit is a specific type of letter of credit in which a buyer extends an unsecured loan to a seller. Red Clause Letters of Credit permit documentary credit beneficiaries to receive funds for any merchandise outlined in the letter of credit. These
What Is Redemption? Depending on the context, the term redemption has different uses in the finance and business world. In finance, redemption refers to the repayment of any fixed-income security at or before the asset’s maturity date. Bonds are the most common type of fixed-income security, but others include certificates of deposit (CDs), Treasury notes
What Is a Redemption Fee? A redemption fee is a fee charged to an investor when shares are sold from a fund. This fee, also known as an exit fee, market timing fee, or short-term trading fee, is charged by the fund company and then added back to the fund. Typically, it only applies when
What Is a Redemption Mechanism? A redemption mechanism is a method used by market makers of exchange-traded funds (ETF) to reconcile the differences between net asset values (NAV) and market values. This process, also referred to as the ETF creation and redemption mechanism, helps to prevents shares of an ETF trading at a discount or premium, keeping
What Is a Redemption Suspension? A redemption suspension is a temporary measure whereby investors in a fund are unable to withdraw, or “redeem,” the capital they invested in the fund. The term is mostly associated with hedge funds, which often reserve the right to impose redemption suspensions under certain rare circumstances. Typically, hedge fund managers
What Is a Red Herring? A red herring is a preliminary prospectus filed by a company with the Securities and Exchange Commission (SEC), usually in connection with the company’s initial public offering (IPO). A red herring prospectus contains most of the information pertaining to the company’s operations and prospects but does not include key details
What Is Red Ink? Red ink is business jargon describing a financial loss. When accountants make physical entries into a general ledger, red ink is used to show a negative number and black ink is used to show that a number is positive or profitable. Key Takeaways Red ink is financial jargon describing the coloring
What Is a Rediscount? A rediscount occurs when a short-term negotiable debt instrument is discounted for a second time. The reason an issuer would do this is to spark demand for loans when investor interest dries up. When liquidity in the market is low, banks can thus try to raise capital by rediscounting. A rediscount
What Is Redlining? Redlining is a discriminatory practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity. Redlining is illegal. It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location (and that area’s default history) rather
What Is a Reduction Certificate? A reduction certificate is a document provided by a lender that clearly outlines and breaks down the remaining balance on a mortgage loan. Key Takeaways A reduction certificate is a document provided by a lender that clearly outlines and breaks down the remaining balance on a mortgage loan.In most instances
