Preferred Redeemable Increased Dividend Equity Security - PRIDES


DEFINITION of 'Preferred Redeemable Increased Dividend Equity Security - PRIDES'

First introduced by Merrill Lynch, PRIDES are synthetic securities consisting of a forward contract to purchase the issuer's underlying security and an interest bearing deposit. Interest payments are made at regular intervals, and conversion into the underlying security is mandatory at maturity.

BREAKING DOWN 'Preferred Redeemable Increased Dividend Equity Security - PRIDES'

Similar to convertible securities, PRIDES allow investors to earn stable cash flows while still participating in the capital gains of an underlying stock.This is possible because these products are valued along the same lines as the underlying security.

  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  3. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  4. Synthetic

    A financial instrument that is created artificially by simulating ...
  5. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based ...
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