  A new financial instrument (a new kind of a loan) is introduced. The
loan-stock instrument (LSI) combines fixed rate instruments (loans, etc.) with
other financial instruments that have higher volatilities and returns (stocks,
mutual funds, currencies, derivatives, options, etc.). This new loan depends on
the value of underlying security (for example, stock) in such a way that when
underlying security increases, the value of loan decreases and backwards. The
procedure to create a risk free portfolio and a technique to fairly price the
LSI is described. The philosophy behind this procedure is quite similar to the
Black-Scholes formalism in option theory. Creation of the risk free portfolio
is possible because the change in the underlying security offsets the change in
the value of the loan (or the amount that the borrower has to repay). The new
financial instrument takes an advantage of the fact that on average the stock
market grows in time. It is beneficial for both the borrower and the lender.
The LSI is more attractive for the borrower than the traditional loan is due to
the decrease in the amount that has to be repaid. This attractiveness
constitutes the benefit for the lender in terms of the market share among the
borrowers. In addition, the lender can charge the extra premium.
