Acceptance Collection
This refers to the commitment by a Drawee (Importer), evidenced by their accepting a Bill of Exchange drawn on them by an Drawer (Exporter), to pay for goods at a fixed date in the future.
Acceptance Credit
A Letter of Credit which includes a term Bill of Exchange in its required documentation. The bill will be accepted by the bank on which it is drawn, usually the issuing or advising bank, and the proceeds paid to the beneficiary at maturity.
Accreting Interest Rate Swap
An accreting Interest Rate Swap is one where the notional principal amount is growing over time. Used (for example) to hedge a loan being drawn down in instalments.
Advance Payment Guarantee
Usually issued for between 10% and 20% of the contract value when an Advance Payment has been offered by the Buyer to the Seller to meet his mobilisation or other initial costs. This type of Guarantee is normally required as security for money released and therefore should be issued in a form which renders it inoperative until receipt by the Seller of the agreed Advance Payment.
Advising Bank
A bank normally located in the country of residence of the receiver of the Letter of Credit or Guarantee/Bond, used to validate the authenticity of the Letter of Credit or Guarantee/Bond before it is advised.
Amendment
A bank normally located in the country of residence of the receiver of the Letter of Credit or Guarantee/Bond, used to validate the authenticity of the Letter of Credit or Guarantee/Bond before it is advised.
Amortising Interest Rate Swap
Amortising Interest Rate Swaps calculate interest on a reducing notional principal amount over the life of the swap, in order to hedge underlying exposures whose principal amount is also reducing. Used (for example) to hedge a loan being repaid by instalments.
Applicant
The party who applies to an issuing bank for a Letter of Creditor a Guarantee/Bond.
At the Money (ATM)
1. An option is at the money when immediate exercise of the option would result in neither a gain nor a loss. This is when the underlying asset price is equal to the strike price of the option.
2. A derivative such as a swap is at the money when, for example, the swap rate is equal to the relevant current market rate, so that the net present value of the derivative is Nil.
Availability
A term used in Letters of Credit to indicate the bank nominated by the issuing bank to pay, accept, incur a deferred payment, or negotiate the Letter of Credit on their behalf.
Avalise
‘Pour Aval’ or to guarantee, is a request for an endorsement, by a bank, on a bill of exchange or promissory note effectively guaranteeing payment.