Principal Exchange Rate Linked Security - PERL

DEFINITION of 'Principal Exchange Rate Linked Security - PERL'

A type of debt security that pays interest semiannually and has a yield that is linked to foreign exchange rates. PERLs are denominated in U.S. dollars, but their repayment is determined by the exchange rate between the dollar and a specific foreign currency within a certain time frame. Many companies will purchase PERLs as a means of hedging against foreign exchange risk.

BREAKING DOWN 'Principal Exchange Rate Linked Security - PERL'

A company wishing to expand into a foreign currency can safely do so via the purchase of PERLs. The PERLs allow for the currency to retain a link to the dollar. Reverse PERLs are denominated in one currency, but pay interest in another.

RELATED TERMS
  1. International Currency Exchange ...

    The rate at which two currencies in the market can be exchanged. ...
  2. Translation Risk

    The exchange rate risk associated with companies that deal in ...
  3. Foreign Exchange

    The exchange of one currency for another, or the conversion of ...
  4. Currency Pairs

    Two currencies with exchange rates that are traded in the retail ...
  5. Interest Rate Parity

    A theory in which the interest rate differential between two ...
  6. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central ...
Related Articles
  1. Investing Basics

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  2. Forex Fundamentals

    6 Factors That Influence Exchange Rates

    An in depth look at out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  3. Professionals

    FOREIGN CURRENCY OPTIONS

    The value of one country’s currency relative to another’s is constantly changing and is known as the exchange rate. Large commercial banks exchange currencies for their own accounts ...
  4. Investing Basics

    Explaining Fixed Exchange Rates

    A government using a fixed exchange rate has linked the value of its currency to the value of another country’s currency, or the price of gold.
  5. Professionals

    Exchange-Rate Risk

    CFA Level 1 - Exchange-Rate Risk. A brief look at how exchange-rate risk can affect investments. Provides an example on the downsides of exchange-rate risk.
  6. Economics

    Macroeconomics: Currency

    By Stephen Simpson For citizens of different countries to conduct trade, they have to buy and sell each other's currencies. The price of a nation's currency, expressed as an amount of a second ...
  7. Forex Education

    Understand the Indirect Effects of Exchange Rates

    Exchange rates have a tremendous influence on the economy. Exchange rates can indirectly affect many of the most important aspects of our lives.
  8. Savings

    The Worst Place to Exchange Currency

    Exchanging currency is a necessary part of traveling, but not all currency exchanges are created equal.
  9. Bonds & Fixed Income

    How Exchange Risk Affects Foreign Bonds

    Investors include foreign bonds in their portfolios to take advantage of higher interest rates or yields, and to diversify their holdings. However, the higher return expected from investing in ...
  10. Forex Education

    What is an Indirect Quote?

    An indirect quote expresses the amount of foreign currency required to buy or sell one unit of the domestic currency in the foreign exchange markets.
RELATED FAQS
  1. How can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
  2. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
  3. What types of companies benefit from reporting results utilizing constant currencies ...

    Understand constant currency figures, and explore some of the reasons why a company is likely to benefit from reporting using ... Read Answer >>
  4. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  5. How does the balance of payments impact currency exchange rates?

    Take a brief look at the relationship between a nation's balance of payments and the exchange rate value of its currency ... Read Answer >>
  6. How do I find out my bank's bid-ask spread for currency conversions?

    Learn how to find your bank's bid-ask spreads for currency conversions, and understand why you should consider alternative ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center