principal exchange-rate-linked security
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Principal Exchange Rate Linked Security
A debt security denominated in U.S. dollars. The principal to be repaid on the security is determined by a particular exchange rate that exists between the dollar and a given currency at a certain time. For example, a company wishing to expand its overseas operations may buy this security in order to finance the expansion in the foreign currency while still linking it to the U.S. dollar. Companies use principal exchange-rate-linked securities to hedge against foreign exchange risk.
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principal exchange-rate-linked security (PERLS)
Dollar-denominated debt in which the amount of principal that is to be repaid is determined by the exchange rate that exists between a specified foreign currency and the U.S. dollar at the time the security reaches maturity.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.