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
What Is Re-Entry Term Insurance? Re-entry term insurance is a type of life insurance contract that offers low rates for a fixed period, and which will continue to offer low rates if the policyholder passes periodic medical examinations. Key Takeaways Re-entry term insurance is a type of life insurance contract that offers low rates for
What is the Reference Base Period? The reference base period is the year in which the Consumer Price Index, measuring changes in consumer prices in the U.S., is equal to 100. A reference base period serves as a benchmark for future periods, allowing economists to judge the rate of U.S. inflation over time. The reference
What Is Reference Entity? A reference entity is the issuer of the debt that underlies a credit derivative. The reference entity is the organization that issued the reference asset (bond or other debt-backed security) that, in turn, is the subject of a credit derivative. The reference entity can be a corporation, government, or other legal
