Escalator clause

Definition:

Provision in a contract allowing cost increases to be passed on. In an employment contract, for example an escalator clause may call for wage increases in line with inflation.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Greenshoe option

 Option that allows the underwriter for a new issue to increase the size of the issue because of high demand for the shares.

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