As Per Advice

Bills of Exchange

• Sight Bill: Payable upon presentation to the drawee.
• Time Bill: Payable at a future date as specified on the bill.
• Demand Bill: Payable on demand.
• Clean Bill: A bill that is not accompanied by any documents.
• Documentary Bill: Accompanied by shipping and other relevant documents.

Key Events

• Early Use: The earliest recorded use of bills of exchange dates back to the Middle Ages, specifically around the 8th century in Islamic trade.
• International Trade Expansion: The use of bills of exchange expanded significantly during the Renaissance with the growth of international trade in Europe.
• Regulatory Developments: Over the centuries, various laws and regulations have been enacted to govern the use and enforcement of bills of exchange.

Detailed Explanation

When the phrase “As Per Advice” is inscribed on a bill of exchange, it indicates that the drawee (the person upon whom the bill is drawn) has been previously informed about the bill being issued. This pre-notification serves several purposes:

• Authorization: Confirms that the drawee is aware of and has consented to the bill.
• Validation: Reduces the risk of disputes or repudiation.
• Efficiency: Expedites the acceptance and payment process.

Mathematical Models

Bills of exchange can involve various mathematical considerations, particularly when dealing with interest calculations for time bills.

Example: Simple Interest Calculation

If a bill of $10,000 is issued with an interest rate of 5% per annum for 180 days, the interest can be calculated as follows:

Where:

• \( P \) = Principal amount ($10,000)
• \( R \) = Rate of interest (5%)
• \( T \) = Time (180 days)

Importance

The use of “As Per Advice” is crucial in international trade and finance for:

• Reducing Fraud: Ensures that only authorized transactions occur.
• Building Trust: Maintains transparent communication between parties.
• Legal Validation: Provides a basis for legal enforcement if disputes arise.

Practical Use

Bond investors use As Per Advice to interpret coupon structure, maturity, duration, yield, credit quality, collateral support, call features, and price sensitivity.

Practical Example

In a bond review, connect As Per Advice to the issuer, cash-flow schedule, seniority, embedded options, benchmark spread, and expected behavior if rates or credit spreads move.

Decision Check

Ask whether As Per Advice changes yield, duration, convexity, credit risk, liquidity, reinvestment risk, or expected recovery.

Watch For

Bond terms can look simple while hiding call risk, extension risk, reinvestment risk, tax treatment, structural subordination, liquidity differences, and benchmark-spread differences.

Interpretation Note

Interpret As Per Advice as decision evidence, not just a definition. Its weight depends on the transaction, measurement date, jurisdiction, market conditions, and whether As Per Advice changes cash flow, risk allocation, reported performance, controls, or investor behavior.

Finance Context

In practice, As Per Advice matters most when it changes a pricing input, contractual right, reporting classification, liquidity choice, tax outcome, or risk-control decision. If none of those change, As Per Advice is descriptive rather than decision-critical.

Finance Use Case

Use As Per Advice when a derivatives or instrument decision depends on payoff shape, exercise rights, maturity, settlement, margin, collateral, counterparty exposure, or hedge effectiveness. The practical task for As Per Advice is to convert contract language into cash-flow and risk behavior.

Review As Per Advice through three questions: what event triggers payment or delivery, who has optionality or obligation, and how value changes when the underlying price, rate, spread, volatility, or time changes. If As Per Advice changes exposure, hedge accounting, liquidity, close-out rights, or stress losses, As Per Advice belongs in the risk model and trade documentation review rather than only in a glossary.

Decision Impact

For As Per Advice, the decision impact is whether the contract changes payoff, hedge behavior, margin, collateral, valuation, settlement, or close-out exposure. If no trigger, input, or counterparty right changes, As Per Advice should not be treated as a separate risk driver.

What To Verify

Verify As Per Advice against the term sheet, confirmation, payoff logic, collateral terms, valuation inputs, margin rules, and close-out rights. As Per Advice matters when cash flow, optionality, hedge behavior, or counterparty exposure changes.

Control Point

The control point for As Per Advice is the contract feature that changes payoff, collateral, margin, settlement, exercise, valuation input, or close-out rights. As Per Advice matters when a holder, issuer, counterparty, or clearinghouse faces a different cash-flow or risk profile. Before relying on As Per Advice, identify the instrument clause, pricing input, and exposure measure it affects. If none of those terms changes, it is not a separate exposure or independent pricing driver.

Use Boundary

The use boundary for As Per Advice is reached when payoff, coupon, maturity, collateral, margin, settlement, exercise rights, close-out rights, and valuation inputs are unchanged. In that case, explain the contract language but do not treat it as a new exposure.

Decision Marker

The decision marker for As Per Advice is the moment contract economics change: payoff, coupon, maturity, collateral, exercise, conversion, settlement, margin, close-out rights, or valuation input. If those economics are unchanged, do not treat it as a new exposure.

Source Check

The source check for As Per Advice is the instrument document: prospectus, indenture, confirmation, term sheet, clearing record, collateral schedule, pricing model, or payoff table. Prefer contract evidence over instrument shorthand when As Per Advice affects rights, cash flow, or valuation.

Decision Evidence

Decision evidence for As Per Advice should show the contract clause, payoff effect, valuation input, collateral treatment, settlement rule, and holder or counterparty right. As Per Advice can change analysis only when those terms alter cash flow, exposure, or price sensitivity.

Related Terms

• Drawer: The person who issues the bill of exchange.
• Drawee: The person upon whom the bill is drawn.
• Payee: The person to whom the bill is payable.
• Acceptance: The drawee’s signed agreement to pay the bill as per its terms.
• Negotiation: Transfer of the bill to another party.

Review Evidence

Review evidence for As Per Advice should make the financial-instrument evidence traceable, not just definitional. For As Per Advice, tie the evidence to the contract, security master record, payoff terms, pricing source, and settlement instructions and explain why that evidence is reliable enough for the finance decision.

Before relying on As Per Advice, document the decision context: the trade date, valuation date, maturity, reset date, and settlement cycle. Keep the As Per Advice evidence trail visible: independent price verification, counterparty record, collateral status, and accounting classification. In Fixed Income work, As Per Advice matters when it changes cash flows, fair value, risk exposure, hedge treatment, or balance-sheet presentation.

• Source: cite the record, filing, contract, model input, system log, or policy that supports As Per Advice.
• Timing: record when As Per Advice is measured: date, period, jurisdiction, market condition, or processing window that could change the financial conclusion.
• Boundary: distinguish As Per Advice from nearby concepts that require different evidence or support a different finance decision.
• Decision use: identify the approval, valuation input, allocation step, control, disclosure, or risk decision affected if the evidence for As Per Advice were different.

The practical risk for As Per Advice is that instrument terms are unreliable unless the legal terms, payoff profile, valuation source, and settlement facts are aligned. If those facts are unavailable, keep As Per Advice in the explanatory layer instead of treating it as decision-grade evidence.

Materiality Check

As Per Advice is material when it can change a finance conclusion, not just when As Per Advice appears in a document. For As Per Advice, test whether the evidence affects cash-flow timing, payoff shape, settlement risk, fair value, hedge designation, counterparty exposure, or balance-sheet treatment. If those decision points are unchanged, keep As Per Advice explanatory and avoid overweighting it in the final decision.

A practical materiality check is to name the decision that would change if As Per Advice is wrong, stale, missing, or tied to the wrong period. As Per Advice warrants deeper review only when pricing, risk measurement, accounting classification, or trade suitability would change.

FAQs