Residual Claimant


The residual claimant is the agent who receives the remainder of a random amount once predictable payments are made.

The most common example: consider a firm with revenues, suppliers, and holders of bonds it has issued, and stockholders. The suppliers receive the predictable amount they are owed. The bondholders receive a predictable payout -- the debt, plus interest. The stockholders can claim the residual, that is, the amount left over.

It may be a negative amount, but it may be large. The same idea of a residual claimant can be applied in analyzing other contracts.


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