Indexed Loan

Indexed Loan

A loan with a payment that changes periodically. For example, the payment may increase if the Consumer Price Index rises to a certain level. Likewise, it may fall if the CPI drops. An indexed loan protects against risks such as inflation risk that would reduce the yield for the lender. Indexed loans are most commonly long-term loans as the changing payment reduces the uncertainty attached to any long term investment. See also: Variable-rate loan.
Mentioned in ?
References in periodicals archive ?
The following results emerge: (i) An IRM is never worse than an FRM, because an FRM is a special case of the IRM contract when [[alpha].sub.1] = 0; (ii) generally, the higher are Corr(f, i) and Corr(y, i), the larger is the gain from an indexed loan relative to an FRM; and finally, (iii) the utility gains under IRMs are generally higher, given that Corr(P, y) is higher.
Compared with the top panel, the bottom panel shows that for our parameters with a fixed cost of issuing an indexed loan, there is a range of correlations where utility under the indexed loan is lower than under the FRM.
The rating agency noted that French RLGs have already negotiated with banks to progressively exit their EUR/CHF indexed loan contracts, and have had support from a EUR 1.5 bln state support fund set up in 2014 which has helped local governments cover the cost of converting their structured loans into conventional debt.
Moody's notes that over the past few years, French RLGs have already negotiating with banks to progressively exit their EUR/CHF indexed loan contracts, as well as have had support from a EUR1.5 billion state support fund set up in 2014 which has helped local governments cover the cost of converting their structured loans into conventional debt.
Regarding loans, the effects of these changes are even more pronounced, as foreign currency indexed loans in the amount of over KM 10.5 billion since January have been classified as foreign currency loans.
Croatia's High Commercial Court has overturned an appeal by eight lenders that were sued over Swiss-franc indexed loans.
Commercial Loan Software System for the indexed loans of the Housing Finance Fund of Iceland to replace the current system.
Interests should be charged only from declining sum of the loan, while indexed loans should be prohibited, the National Bank said.
The quarterly measure of credit euroization (treating indexed loans as foreign currency loans) shows that it too was very high in this period, hardly varying at all.
Furthermore, and contrary to the popular view, real interest rates on indexed loans actually averaged slightly less than those on unindexed debt.
Calypso customers in Latin America are among the users and dealers of a range of asset classes including interest rate derivatives, settlement and non-settlement currencies, money market indexed loans, fixed income instruments, FX products and derivatives hedging, the firm said.
In the cash flow analysis, Fitch recognised the additional spread of IRPH indexed loans over the Euribor rate by adding a margin of 1% per year to these loans.