Financial Guarantee

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Dictionary Says

Definition of 'Financial Guarantee'

An non-cancellable indemnity bond that is backed by an insurer in order to guarantee investors that principal and interest payments will be made. Many insurance companies specialize in financial guarantees and similar products that are used by debt issuers as a way of attracting investors. The guarantee provides investors with an additional level of comfort that the investment will be repaid in the event that  the securities issuer would not be able to fulfill the contractual obligation to make timely payments. It also lowers the cost of financing for issuers because the guarantee typically earns the security a higher credit rating and therefore lower interest rates. 
Investopedia Says

Investopedia explains 'Financial Guarantee'

Most bonds are insured by a financial guaranty firm (also referred to as a monoline insurer) against default. The global financial crisis of 2008-09 hit financial guarantee firms particularly hard. It left numerous financial guarantors with billions of dollars of obligations to repay on mortgage-related securities that defaulted and it caused firms to have their credit ratings slashed. 

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Search results for

'Financial Guarantee'

  • Bond Insurers: Redux

    http://stocks.investopedia.com/stock-analysis/2009/Bond-Insurers-Redux-MBI-ABK0226.aspx
    ... when MBIA (NYSE:MBI) announced that it would create a separate public financial
    guarantee insurance company using a dormant insurance subsidiary in Illinois. ...

  • Rate Cuts Don't Guarantee Great Returns

    http://www.investopedia.com/articles/financial-theory/08/rate-cuts-stock-returns.asp
    Rate Cuts Don't Guarantee Great Returns. May 13 2008 | Filed Under ยป Economics,
    Financial Theory. Whenever the Fed begins lowering interest rates Wall Street ...

  • What's the difference between a bank guarantee and a letter of ...

    http://www.investopedia.com/ask/answers/06/202005.asp
    ... Essentially, the bank guarantee acts as a safety measure for the opposing party
    in the transaction. These financial instruments are often used in trade ...

  • Dispelling 5 Myths About Financial Planners

    http://www.investopedia.com/articles/01/042501.asp
    ... seven figures. Financial planners aren'ta guarantee or magic solution but
    they can be of help in many circumstances. (Find out more ...

  • 4 NYSE Stocks Showing Triple-Digit Growth

    http://stocks.investopedia.com/stock-analysis/2010/4-NYSE-Stocks-Showing-Triple-Digit-Growth-KEI-WNC-IDT-MBI1004.aspx
    ... 4. MBIA (NYSE:MBI) provides financial guarantee insurance and other financial
    services through its subsidiaries. Despite being down ...

  • Four Stocks That Will Make You Rich Or Break You

    http://stocks.investopedia.com/stock-analysis/2009/Four-Stocks-That-Will-Make-You-Rich-Or-Break-You-EK-LIZ-ABK-MBI1218.aspx
    ... MBIA (NYSE: MBI) is another financial guarantee company that lost its way, peaking
    at over $70 per share before hitting the low single digits. ...

  • XL Capital Looks For Higher Returns

    http://stocks.investopedia.com/stock-analysis/2011/XL-Capital-Looks-For-Higher-Returns-XL-ALL-TRV-MBI-AGO0216.aspx
    ... A disastrous decision to diversify into other lines of business, such as the financial
    guarantee industry that was spun out as Syncora and was hit by similar ...

  • How Does Your Margin Grow?

    http://www.investopedia.com/articles/optioninvestor/04/120904.asp
    ... Margin is a financial guarantee required to ensure fulfillment of contract
    obligations. Margin is also called a performance bond. ...

  • Principal-Protected Notes: Hedge Funds For Everyday Investors

    http://www.investopedia.com/articles/bonds/07/principal_protected.asp
    ... Engineering a PPN, Ensuring the Guarantee When a financial engineer wants to guarantee
    the nominal value of the original invested principal, a hedge will be ...

  • Liquidity And Toxicity: Will TARP Fix The Financial System?

    http://www.investopedia.com/articles/economics/08/tarp-financial-system.asp
    ... Many financial institutions and funds had exposure to Lehman Brothers and, as a
    result ... This necessitated the Fed to provide a guarantee to money market funds. ...

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