Pay-up

Pay-up

The loss of cash resulting from a swap into higher-priced bonds or the need/willingness of a bank or other borrower to pay a higher rate of interest to get funds. Used in the context of general equities. (1) When an investor who wants to buy a stock at a particular price hesitates and the stock begins to rise; instead of letting the stock go, he "pays up" to buy the shares at the higher prevailing price. (2) Buy shares in a high-quality company at what is felt to be a high, but supportable, price due to its quality.

Payup

1. A swap for a security with a higher yield. For example, an investor may swap a bond with a certain face value and coupon for another bond with an equal face value but a higher coupon. One refers to the extra funds the investor yields from the higher coupon as a payup.

2. The additional money an investor needs in order to buy a security with a higher market value. For example, an investor may need payup money if he/she owns a bond, but wishes to buy another bond with a higher coupon rate.