Affirmative Covenant

AAA

DEFINITION of 'Affirmative Covenant'

A type of promise or contract which requires a party to do something. For example, a bond covenant that provides that the issuer will maintain adequate levels of insurance or deliver audited financial statements is an affirmative covenant.

INVESTOPEDIA EXPLAINS 'Affirmative Covenant'

Affirmative (or positive) covenants can be compared to restrictive (or negative) covenants, which require a party not to do something, such as sell certain assets. In bond agreements, both affirmative and restrictive covenants are used to protect the interests of both issuer and bondholder.

RELATED TERMS
  1. Running With The Land

    The rights and covenants in a real estate deed that remain with ...
  2. Acceleration Clause

    A contract provision that allows a lender to require a borrower ...
  3. Negative Pledge Clause

    A negative covenant in an indenture stating that the corporation ...
  4. Negative Covenant

    A bond covenant preventing certain activities, unless agreed ...
  5. Acceleration Covenant

    A clause included in certain debt securities and swap agreements ...
  6. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
RELATED FAQS
  1. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  2. What is the difference between a Debit Order and a Standard Order in a bank reconciliation?

    While both debit orders and standard orders represent recurring transactions that must be considered in bank reconciliations, ... Read Full Answer >>
  3. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  4. What is the difference between marginal utility and marginal value?

    Depending on the context, marginal utility and marginal value can describe the same thing. The key word for each is "marginal," ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How is cost basis calculated on an inherited asset?

    Typically, the cost basis on inherited assets is the fair market value as of the time of the decedent's death or actual transfer ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  3. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  4. Investing Basics

    Understanding Total Return Swaps

    A total return swap is a contract in which a payer and receiver exchange the credit risk and market risk of an underlying asset.
  5. Economics

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  6. Investing Basics

    How Does a Strangle Work?

    A strangle is the sale or purchase of both a put and call option on the same underlying investment with the same expiration.
  7. Economics

    What's a Stock Keeping Unit (SKU)?

    A SKU, or bar code, is a unique identification code that retail and wholesale sellers use to track their inventory of products and services.
  8. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  9. Economics

    Understanding the Product Life Cycle

    Product life cycle is the period of time during which a product is conceived and developed, brought to market and eventually removed from the market.
  10. Fundamental Analysis

    Explaining Price Targets

    A price target is what an investment analyst projects a security’s future price to be.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!