Price Swap Derivative

Price Swap Derivative

An obligation made by one company to secure the declining value of another company's assets through the commitment of shares.

Notes:

Made famous by Enron, this method of backing a company's declining assets helps to inflate the value of a troubled company by hiding losses. Furthermore, due to the volatile nature of the stock market, devaluations in price of the securing company directly relates to a commitment of more shares and thus a dilution occurs.

See also: Asset, Derivative, Dilution