Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Escrow Agreement

What it is:

An escrow agreement is a certificate from an approved bank guaranteeing that an indicated financial security is deposited at that particular bank.

How it works (Example):

John writes a call option for stock in company ABC. When John presents the escrow agreement to the bank, he is considered to have covered the asset. As a result, John will not have to meet margin call requirements at the bank.

Why it Matters:

Escrow agreements offer investors a safety net in the event of margin calls.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...