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because money or stock is already set aside. In the event that the holder of the put option decides to
exercise the option, the writers risk is more limited than it would be on an uncovered or naked put option.
Cramdown
The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of
creditors.
Crash
Dramatic loss in market value. The last great crash was in 1929. Some refer to October 1987 as a crash but
the market return was positive.
Crawling peg
An automatic system for revising the exchange rate. It involves establishing a par value around which the
rate can vary up to a given percent. The par value is revised regularly according to a formula determined by
the authorities.
Credible signal
A signal that provides accurate information; a signal that can be distinguish among senders.
Credit
Money loaned.
Credit analysis
The process of analyzing information on companies and bond issues in order to estimate the ability of the
issuer to live up to its future contractual obligations. Related: default risk
Credit enhancement
Purchase of the financial guarantee of a large insurance company to raise funds.
Crediting rate
The interest rate offered on an investment type insurance policy.
Creditor
Lender of money.
Credit period
The length of time for which the customer is granted credit.
Credit risk
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment
may not be made on a negotiable instrument. Related: Default risk
Credit scoring
A statistical technique wherein several financial characteristics are combined to form a single score to
represent a customers credit worthiness.
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