1 Glossary Accrued Interest Amortizing Bond ASK Price (Offer Price) Automatic Order Matching (AOM) Average Yield BEX The amount of interest accumulated but not yet paid between the last payment and the settlement date. This is the interest that belongs to the seller of the bond. The bond that periodically pays coupon payments and principal repayments. Once the bond reaches its maturity, the entire par/face value payment will all be paid off. A price in which sellers are willing to sell. A computerized screen-based trading method which allows brokers to electronically send buy or sell orders from their offices to BEX trading platform. The system implements an order queuing process and arranges the orders according to price and then time priority. Orders are first grouped according to price with the best price taking precedence. Then, within each price group, orders are arranged according to the earliest time. Simultaneously, the system begins to automatically match the first buy and sell orders in the queue while at the same time confirming each executed transaction via the brokers' terminals. Rate of return on the bond coupon payment over the price paid on the security Bond Electronic Exchange, a department of SET, represents and handles electronic trading platform and transactions for fixed income securities in the capital market with concentration around diversification awareness, education, transparency, clearing and settlement, and subsequently increases liquidity. Basis Point (bp) A unit measuring the bond yield. For example, 100 bp = 1% Bearer Bond A bond that does not record its owner's name anywhere. Possession of the bond certificate is therefore the only proof of ownership. Benchmark Bond A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. BIBOR Bangkok Interbank Offered Rate is a series of short-term reference rates ranging from 1 week to 1 year, which are quoted by predetermined banks. BIBOR is published at 11:15AM by The Bank of Thailand on a daily basis. Bid Price The price at which a buyer is willing to buy. Bill of Exchange Bills of Exchange are similar to cheques and promissory notes, which (B/E) sometimes are referred to as a draft. They can be drawn by individuals or banks and are generally transferable by endorsements. The difference between a promissory note and a bill of exchange is that this product is transferable and can bind one party to pay a third party that was not involved in its creation.
2 Bond Bondholder Bondholders Representative Bond Index A contractual agreement requiring the bond issuer (borrower) to repay investors (lenders) the amount borrowed plus interest (coupons) over a pre-specified period of time. A firm s capital structure often contains both equities and bonds. Bondholders are considered creditors of the firm, and stockholders are the firm s owners. In an event of bankruptcy, the bondholders have the first priority over the claim of the assets. assigned by the issuer to represent bondholders, usually banks or financial institutions. The bondholder s representative has a fiduciary duty to act in the best interest for the bondholders. A bond index is used to track the progress of the bond market. It is used as a benchmark. It is most often quoted in yield format rather than price; the yield is actually the yield-to-maturity on the bonds in the index. Book Closing Date The day on which a company instructs the registrar to temporarily suspend transferring of its shares. Bondholders whose names appear at the registrar on the first book closing date are entitled to the latest coupon payments. The rights are invalidated when the book is reopened. Bank of Thailand (BOT) Broker Business Risk Callable Bond Call Date Call Option Call Premium The Bank of Thailand started operations on December 10,1942. The responsibility includes all central-banking functions. As a central bank, BOT overlooks the monetary policy to maintain monetary stability; supervise financial institutions to ensure that they are secure and supportive of economic development; act as banker to the Government and recommend economic policy to the government; act as banker to financial institutions; manage the international reserves; and print and issue bank notes. The financial institution or its sales representatives, who advise clients how to properly invest, educate their clients what is the current market situation, including rules and regulations, and finally take and execute your buy or sell orders. The risk that the cash flow of an issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses and debt obligations. A bond with an embedded Call option, allowing the issuer to call or to redeem the bond prior to its maturity once certain conditions are met. It is a right to call on the bond, not an obligation. The issuer tend to call these bonds when the interest rates fall (rising price); thus, the issuer can save money on a new issued bond with lower periodically interest payments. The date of which the issuer can redeem the security before its maturity. An option contract that gives the issuer the right (but not an obligation) to redeem the security at a pre-specified price, on or prior to maturity. Premium paid above the option-free bond by the bond issuer for the right to call on the bond prior to its maturity.
3 Call Provision An embedded option granting a bond issuer the right to buy back all or part of the issue prior to maturity. Call Price The price at which the bond with a call provision will be called/redeemed by the issuer. Call Risk Call risk refers to the risk that a bond may be called when the investor does not want it to be called. Bonds are often called when interest rates decline, so investors in the bond get their cash back and have to reinvest it at the lower rates. Call Schedule A call schedule is a list of the dates that a bond can be called, together with the corresponding price for each call date. Cap The upper limit placed on the interest rate on a floating-rate note (also known as FRN) CAPS (See SLIPS) Capital Gain When a security is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost. Capital Loss When a security is sold for a loss, the capital loss is the difference between the net sales price of the securities and their net cost. Capital Market Capital market is the broad term for the market where investment products such as stocks and bonds are bought and sold. It includes all the people and organizations that support the process. Capital market, in general, refers to the market where the securities maturing in more than a year (long-term) are issued and traded. Clean Price Bond price excluding the accrued interest to sellers. Clearing and Process of paying and transferring money and securities following the Settlement securities trading, which is confirmed. The clearing and settlement process is managed by the Thailand Securities Depository Co., Ltd. (TSD), the only central securities depository in Thailand and a wholly owned subsidiary of the SET Collateral An additional security, tangible or even intangible assets pledged to support the project financing Collateralized Investment-grade bonds backed by a collection of junk bonds with Bond Obligation different levels of risk, called tiers, that are determined by the quality of (CBO) junk bond involved. CBOs backed by highly risky junk bonds receive higher interest rates than other lower risk junk bonds CBOs. Collateralized A security backed by a pool of pass-through rates, structured so that there Mortgage are several classes of bondholders with varying maturities, called Obligation (CMO) tranches. The principal payments from the underlying pool of passthrough securities are used to retire the bonds on a priority basis as specified in the prospectus. Commercial Paper A short-term unsecured note issued by corporation. The maturity of CP is less than 270 days.
4 Company Rating Ratings issued by rating agencies. Ratings are based on an evaluation of an issuer s financial strength to meet its credit obligations. Ratings range from AAA, AA,.., to D. The rating below BBB is usually considered speculative. Convertible Bond A convertible security, which can be exchanged for a pre-specified number of common stocks of the issuing company at a pre-determined conversion price. Conversion Price Pre-determined price at which convertible bonds can be converted into common stock. Conversion Ratio A pre-determined ratio that determines how many shares of common stock will be exchanged for each convertible bond when the conversion takes place. Conversion Value The value of a convertible security if it is converted immediately. Convexity A supplemented measure to the duration to capture the curvature or the convexity effect of the bond s price to changes in interest rates Corporate Bond Debt obligations issued by private entities. Coupon Frequency is simply how often over a year the issuer promises to pay interest on a debt security (annually, semi-annually, or quarterly). Coupon Payment The periodic interest payment payable to bondholders during the life of the bond. Coupon Rate The stated percentage rate of interest in which the coupon payments will be determined. Covenants A contractual provision in a bond indenture, which includes both a positive covenant that require some required actions to be met, and a negative covenant limiting some actions not to be taken. Credit Rating Agencies Credit Risk Credit Spread Current Par Agencies committed to provide the fixed income market with company s and individual issue s rating based on computed financial ratios of the firm. The ratings range from AAA (highest rating) to C (junk bonds) to D (currently default). The risk that an issuer of the bond may default on its obligations, and that the periodic coupon payments may not be made. (also refer to default risk) The spread between Government securities and non-government securities that are identical in all respects except for quality rating. For instance, the difference between yields on Treasuries and those on single A-rated industrial bonds (also see Quality Spread). Referred to the current par value of a bond after a deduction of the principal prepayment. Since it involves the principal prepayment, the current par of an amortizing bond will gradually decline along with its time to maturity.
5 Current Yield Current yield is the rate of return an investor will get, without taking into account the value of the premium or discount of the purchase price. The current yield is not a good indication of your return on investment. Yield to maturity and yield to call take into account the value of the discount or premium paid for the bond, and as such they offer a much better indication of the value of the bond. Dealer Financial institution, approved by SEC., buys or sells securities for its own account and bears the risks involved. A customer who purchases bonds from the dealer will receive the bonds held in the dealer's account. Trading by a market maker to provide liquidity for assigned bonds is usually undertaken with a role as a dealer. Debenture A debenture is a certificate that shows the debt of a government or company. It is backed only by the general credit of the issuer. It is not secured by the assets of the issuer. Default Risk (See Credit Risk) Dirty Price The price paid by the bond buyer, which generally includes the accrued interest. It s also known as Gross Price Disclosure The reveal to the public of the relevant information of listed bond issuers. The SET requires these issuers to inform investors of material information, which may affect bond prices or bondholders' interests or investment decisions. Examples of disclosure requirement is Financial reports at the end of each accounting period, e.g., quarterly and annual financial statements, annual reports. The SET's listed bond issuers are required to disclose the information. Discount Bond Debt security sold for less than its face value. Duration A common gauge of price sensitivity of a fixed income security to a change in interest rates. It s usually referred to as the first derivative of a bond s price function with respect to yield. Effective Duration A measure of sensitivity of a bond with embedded option s price to interest-rate changes, with a recognition of the fact that the yield changes may change the expected cash flow. Effective Interest Rate The annual rate at which an investment grows in value when interest is credited more often than once a year. Embedded Option An option that is part of the structure of a bond that either provides the bondholder or issuer the right, but not an obligation, to take some action against the other party. (Also see call option, put option) Event Risk The risk that the ability of an issuer to make interest and principal payments will change because of rare and unanticipated changes in the market environment such as a natural or industrial accident or some regulatory changes, takeover, or corporate restructuring. Exchange Risk The variability of a security value that results from unexpected changes in exchange rate Ex-All (See XA)
6 Ex-Interest (See XI) Ex-Principal (See XP) Face Value (See Par Value) Fed Fund Rate The interest rate charged by banks on overnight loans of their excess reserve funds to other banks. Financial Market Market for the exchange of capital and credit in the economy. Financial markets include the stock market, bond market, commodities market, and foreign exchange market. Financial markets may also be categorized as either money markets or capital markets. Money markets deal in short term debt instruments whereas capital markets trade in long term debt and equity instruments. Fitch Ratings One of the two credit rating agencies in Thailand, which was established in Thailand in February of 2001 (See Credit Rating Agency). Fixed Rate Bond A bond, which the interest payments to bondholders are fixed over the life of the bond. Floating Rate Bond A bond, which the interest payments are variable over the life of the bond. The floating-rate is usually pegged to the THBFIX. The interest amount can rise or fall in concert with the rate or yield it is related to. Floor A minimum yield that an issuer of a floating-rate security does not allow to fall below. It is usually indicated in the prospectus. Gross Price (See Dirty Price) High Yield Issues Bonds, which have rating below investment grades, also referred to as junk bonds. This type of security, therefore, pays really high interest payments Indenture The formal agreement between bondholders and an issuer defining key elements of the bond or debenture such as maturity, amount issued, redemption rights and protective covenants. This information is shown in the prospectus. Inflation Risk The possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency. Inflation causes money to decrease in value at some rate, and does so whether the money is invested or not. Inscribed Bond Bond in the inscribed form exists not as printed certificate but it is deposited with the registrar. The registrar will issue a receipt to the inscribed bond owner. The registrar must be notified in an event of a transferring of ownership. Interest is paid by depositing fund into an account specified by the inscribed bond owner. Interest Income The income a person receives from holding the debt security. Interest-Only Strip A security based solely on the interest payments form a pool of mortgages, Treasury bonds, or some other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop and the value of the IO falls to zero.
7 Interest Rates Interest Rate Cap The rate where the periodic coupon payments can be derived. is also known as interest rate ceiling is an agreement that puts an upper bound on the interest rate when the rates are rising, which subsequently putting the floor on its price. Interest Rate Floor An agreement opposed to interest rate cap. It prevents the reference rate to fall below a pre-specified strike rate. Interest Rate Risk The risk that a security value changes due to a change in interest rates. Investment Grade Bonds that are rated BBB or above are generally considered investment grade bonds. Issue A particular financial asset or debt, such as bond. Issue Date The date when the bond will be officially issued. The coupon payments and the number of days used to calculate the coupon payment will start from this point forward. Issue Rating (See credit rating) Issuer An entity or corporation that issues a financial asset or debt Issued Size Total proceeds to be received by the issuer. Junk Bond (See High Yields) Legal Risk (See Political Risk) Liquidity Risk measures the ability to buy and sell bonds with relative ease at or near its value. The primary measure of liquidity risk is the size of the bid-ask spread. It follows that the wider the dealer spread, the more liquidity risk. Macaulay Duration The weighted-average term to maturity of the cash flows from the bond, where the weights are the present value of the cash flow divided by the price of the bond. (also see duration) Mark-to-Market A procedure whereby the profits or losses are settled at the end of trading session to reflect current market value of the security. Market Maker An entity authorized by the Exchange to buy and sell a particular security with an objective to provide trading liquidity for the security. Generally, a market maker is obligated to proclaim or quote buying and selling prices for a particular security at a particular time. Maturity Date The date that a bond comes due. Principal and any accrued interest must be all paid off Modified Duration A measure of the sensitivity of an option-free bond s price to interest-rate changes, assuming that the expected cash flow does not change with the interest rates. Money Market A part of capital market that is short-term in nature (less than a year). Short-term bills, commercial papers and bankers acceptances are included in this type of financial obligation. Monte Carlo Simulation An analytical technique for solving a problem by performing a large number of trial runs, called simulations, and inferring a solution from the collective results of the trial runs.
8 Mortgage Back- Securities (MBS) Mortgage Pass- Through (MPT) Negative Pledge Non-Competitive Bid Odd Lot Securities backed by a pool of mortgage loans (see MPT) One or more mortgage holders form a collection (pool) of mortgages and sell shares or participation certificates in the pool. A bond covenant that limits or prohibits altogether certain actions unless the bondholders agree; also known as a negative covenant. A Bid for a specific number of Bonds at the average price of the competitive bids. The Non-Competitive bid price is not actually known until the auction is completed. A trading order that is not in a multiple of 100. Currently, SET sets each board lot to equal to 100 units. For example, a customer requests to buy 25 issues of ABC bond is considered an odd lot. Off-The-Run Issue refers to the previous issued government bond(s) that is/are being traded in the secondary market (also see On-The-Run Issue) On-The-Run Issue The most recent issued government bond in a particular maturity range (also see Off-The-Run Issue) Options gives the buyer or the issuer the right, but not the obligation, to buy, sell or redeem a security at a predetermined price (strike price) on or before a given date. Option Adjusted Spread (OAS) Outstanding Size A spread over an issuer s spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market prices. is the total bond outstanding at the present time. For a non-amortizing bond, the outstanding size will equal to the issued size. However, for an amortizing bond, the outstanding size will gradually decline and paid off at maturity. A repurchase agreement with a term of one day (overnight). Overnight Repo Over-the-Counter A securities market that is conducted by dealers throughout the country through negotiation of price over the phones rather than through the use of an auction system as represented by a stock exchange. However, once the deal has been reached, the transaction may be put through the exchange for clearing and settlement process. Par Value Payment Date Political Risk Portfolio Also known as Face Value or principal value of a security. A bond selling at par, for example, is worth an amount equivalent to its original issue value or its redemption value at maturity. The date on which each bondholder of record will be sent a check for the periodic coupon interest payment. Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency, changes in political climate, or other changes in the business climate of a country. A collection of investments, real and/or financial. The common welldiversified portfolio consists of common stocks, bonds, real estates and derivatives.
9 Positive Convexity A property of option-free bonds whereby the price appreciation for a large upward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates. Premium Bond A bond that is selling for more than its par value. Present Value The amount of cash today that is equivalent in value to a payment or a stream of payments, to be received in the future. Its calculation involves the periodic cash flows and principal repayment being divided by 1 plus interest rate. Price Risk The risk that the value of a fixed income security (or a portfolio) will decline in the future (as rates increase). Should an investor decide to sell the bond in the secondary market prior to its maturity, the investor will recognize a capital loss. Primary Dealer Primary Market Principal Priority Claim Financial Institutions that are granted rights, by the Bank of Thailand, to auction the government securities. The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those same securities is done in the secondary market. (See par value) A priority claim is an unsecured debt that has a priority to receive payment over other unsecured claims. Bonds, generally speaking, have priority claims over any common stocks in an event of a bankruptcy. Private Placement The sale of a bond or other securities directed to a limited number of investors, more often than not, financial institutions. Prospectus Public Offering Puttable Bond A document prepared to provide details about the bond issue and company information to investors in a public offering of shares. The prospectus contains information on the company's business, future projects, management, financial information, past performance and earnings forecasts. Details of the issue include type of security being offered, amount of issue, par value, issue date, coupon rate, coupon payment dates and etc. The sale of bonds or other securities by an entity to the public to raise funds for business expansion or public investment and spending. A public offering of corporate securities must be undertaken by an underwriter and approved by the SEC. Also, a relevant prospectus must be prepared in conformity with regulations. A bond with a put option. Bondholder of this security has the right, but not an obligation, to sell the bond back to issuer at a predetermined price prior to its maturity.
10 Put Through (PT) A method for securities trading on the big lot board, which allows brokers to advertise their buy or sell interests by announcing bid or offer prices. These must be quoted via a computer screen. Members, who are interested, can deal directly with one another on behalf of their clients or for their own accounts. The price may be adjusted during the negotiation; hence, the executed price may not be the same as the advertised price and may not follow the Price Spread rules. Quality Spread (See Credit Spread) Redemption When the principal of a bond is paid off, the bond is said to be redeemed. A bond can be redeemed at its maturity, or on its call date or its put date. Registrar A financial institution appointed to record issue and ownership of company securities Reinvestment Risk referred to the risk that proceeds received from either the coupon payments or the principal repayment will have to be reinvested at a lower potential interest rate than the current rate. Repo also known as a Repurchase Agreement. An agreement, with a commitment by a seller, to buy back a security from a buyer at a prespecified rate and price at a designated future date. Since it is usually backed by a Treasury security, it automatically represents a collateralized short-term loan. Repo Rate An interest rate in the Repo transaction. Repurchase (See Repo) Agreement Risk A measure of the degree of uncertainty and/or financial loss inherent in an investment or decision. Risk-Risk is defined as a Black Box Risk in bond investing. It includes every other risks that are not specific to any of the already defined risks. Saving Bond A savings security issued by the government or an authorized agent. A "savings bond" is designated as such in the regulations offering the bonds for sale. The bond is a contract between the government and the bond owner. Bond owner, for the first time, can buy this bond directly from government savings bank or selected commercial banks. Scripless referred to as a paperless or computerized book-entry system. Thailand Securities Depository Co., Ltd. (TSD) operates the depository and computerized book-entry transfer system, records all scripless transactions electronically and acts as a central nominee that holds shares on behalf of bondholders. SEC Securities and Exchange Commission, Thailand was officially established in 1992 to supervise, develop, implement and enforce various rules and regulations for Thai capital market. Secondary Market The market where securities are traded after they are publicly offered in the primary market. Most activities occur in the secondary market.
11 Secured Bond A bond backed by the pledge of collateral, a mortgage, or any other liens, as opposed to an unsecured bond, called a debenture. Securitization The process of creating a pass-through security, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets and their cash flows. In addition, it also refers to the replacement of non-marketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets. Senior Bond Debt that, in an event of bankruptcy, must be repaid before subordinated debts and/or common equities receive any payments from the liquidation. Sensitivity Analysis is an analysis of the effect on a change in price relative to a change in yield. Settlement Date The settlement date is conventionally set to 2 business days after the transaction date. Sharpe Ratio A mathematical measure of a portfolio's return relative to the total variability of the portfolio. Shelf Registering A procedure allowing firms to file one registration statement covering several issues up to two years. With the registration is in place, the company is required to update its information on a regular basis. Short-term Debenture SLIPS Soft Call Short-term Debt obligations, also known as Bill for government-issued securities, usually recorded as current liabilities, and thus, requiring payment within a year. is a set of hybrid financial instruments that was introduced during the Asian financial crises. SLIPS is sometimes referred to as CAPS. SLIPS/CAPS consists of a combination of two securities, Preferred stocks + Subordinated Debentures. A provision that may be attached to a convertible security. It indicates that once the underlying stock of the convertible reaches a predetermined price during a preset term, the bonds become callable. A gap between bid and offer prices of a security. Spread Standard Deviation s - A common measure of spread in the sampling distribution of a random variable. In a financial context, the standard deviation is commonly used as a risk measurement, which is essentially the volatility of a price movement. Straight Bond Strips Structured Note is a fixed income security without any embedded options such as call, put, or convertibility. It is referred to as an Option-Free Bond. Separate Trading of Registered Interest and Principal of Securities (Strips) is a program whereby Zero Coupon Bonds are created by separating (Stripping) interest payments and principal payments. Each cash flow is then sold as a separate Zero Coupon security. is a debt that has been customized for the buyer, often by incorporating unusual options.
12 Subordinated Bond is a bond that has a lower priority than a senior bond. In an event of an issuer s cash flow shortage and there is not enough money to pay all the company's outstanding debts, the senior bond, which has higher-priority, gets paid first. The subordinate ones get paid out of what is left, if there is any. Systematic Risk In the context of modern portfolio theory, systematic risk is the portion of the risk that cannot be diversified away. Taxable Income referred to income that is taxable by the government. Tenor is also known as maturity of a bond. Term Bonds also known as bullet-maturity bonds or simply bullet bonds, bonds whose principal is payable at maturity. Term Repo A repurchase agreement with a term of more than one day. Term to Maturity the number of years over which the issuer has pledged to meet the obligation, set out in the bond indenture. The maturity of a bond refers to the date that the debt will cease to exist, at which time the issuer will redeem the bond by paying the principal (or face value). Time to Maturity The time remaining until a bond expires. It is also known as time until expiration. Treasury Bills Treasury bills are issued with less than 1 year maturities, and they are sold at a discount to par. The bonds do not pay periodic interest payments, and the return an investor receives is based on the amount that the purchase price is discounted from par. Treasure Bonds Government s long-term debt instruments issued with longer than 1 years term to maturities. TRIS Ratings Thailand s first credit rating agency, which was established on July 27 th, 1993 to conduct credit rating business (see Credit Rating Agency). Trustee A bank designated by the issuer as the custodian of funds and official representative of bondholders. Trustees are appointed to ensure compliance with the bond documents and to represent bondholders in enforcing their contract with the issuer. Underwriter An investment bank company that buys an issue of securities from a company and resells it to private investors. In general, a party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities. Unsecured Bond (See Debenture) Unsystematic Risk Also known as the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe, all of which can be eliminated through diversification. Variable Rate Debt instrument made at an interest rate that fluctuates based on a reference rate, such as Prime rate or LIBOR.
13 Volatility Risk XA A measure of the uncertainty or risk in the future price of an asset. Typically volatility is measured by the standard deviation or variance of returns on the asset. (Also see Standard Deviation). Excluding All - Buyers are not entitled to all rights prescribed at the time. XA usually involves both XI and XP (See above for XI and XP s descriptions). BEX also posts this sign on a bond 2 days before the first day of the bond s book closing date. XI XP Yield Yield Curve Yield to Call Yield to Maturity Yield to Put Yield to Worst Zero Coupon Bonds Sign that BEX posts on a bond 2 days before the first day of the bond s book closing date. XI is abbreviated from Excluding Interest The date on which a security trades without the interest. Investors who purchase the security on or after the ex-interest date will not receive the interest payment. Sign that BEX posts on a bond 2 days before the first day of the bond s book closing date. XP is referred to Excluding Principal Buyers are not entitled to the principal payment if the bond is purchased during this period. This sign involves only amortizing bond. The percentage rate of return paid on a security, or the effective rate of interest paid on a bond or note. The graphical interpretation of the relationship between the yields and the maturities on bonds of the same credit quality. The percentage rate of return on a bond if the investor buys and holds the security until the call date. This rate is valid only if the bond is called prior to its maturity. Also known as YTM. The percentage rate of return paid on a fixed income security if the investor buys and holds it until its maturity. The calculation for YTM is based on the coupon rate, time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the YTM. The percentage rate of return on a bond if the investor buys and holds the bond until the put date. This rate is valid only if the bond is sold back to the issuer prior to its maturity. The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date A bond in which no periodic coupon payment is paid over the life of the contract. Both principal and interest are paid at the maturity. Therefore, this type of bond is normally sold at a deep discount from its face (par) value.
Chapter 10 Fixed-Income Securities Bond: Tradable security that promises to make a pre-specified series of payments over time. Straight bond makes fixed coupon and principal payment. Bonds are traded mainly
Contents 1. What Is A Bond? 2. Who Issues Bonds? Government Bonds Corporate Bonds 3. Basic Terms of Bonds Maturity Types of Coupon (Fixed, Floating, Zero Coupon) Redemption Seniority Price Yield The Relation
DRAFT: 10/03/07 Glossary of Common Derivatives Terms American Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank or trust company evidencing its ownership of underlying foreign securities.
Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 9-1 a. A bond is a promissory note issued by a business or a governmental unit. Treasury bonds, sometimes referred to as
Interest Rates and Bond Valuation Chapter 6 Key Concepts and Skills Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean
MONEY MARKET FUND GLOSSARY 1-day SEC yield: The calculation is similar to the 7-day Yield, only covering a one day time frame. To calculate the 1-day yield, take the net interest income earned by the fund
Review for Exam 1 Instructions: Please read carefully The exam will have 21 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation
January 2008 Bonds An introduction to bond basics The information contained in this publication is for general information purposes only and is not intended by the Investment Industry Association of Canada
Answers to Chapter 5 Questions 1. First, money market instruments are generally sold in large denominations (often in units of $1 million to $10 million). Most money market participants want or need to
Bond Valuation 1 Topics in Chapter Key features of bonds Bond valuation Measuring yield Assessing risk 2 Determinants of Intrinsic Value: The Cost of Debt Net operating profit after taxes Free cash flow
PRODUCT INFORMATION SHEET - BONDS 1. WHAT ARE BONDS? A bond is a debt instrument issued by a borrowing entity (issuer) to investors (lenders) in return for lending their money to the issuer. The issuer
CHAPTER 20 LONG TERM FINANCE: SHARES, DEBENTURES AND TERM LOANS Q.1 What is an ordinary share? How does it differ from a preference share and debenture? Explain its most important features. A.1 Ordinary
American Options and Callable Bonds American Options Valuing an American Call on a Coupon Bond Valuing a Callable Bond Concepts and Buzzwords Interest Rate Sensitivity of a Callable Bond exercise policy
Bonds and Yield to Maturity Bonds A bond is a debt instrument requiring the issuer to repay to the lender/investor the amount borrowed (par or face value) plus interest over a specified period of time.
University of California, Merced EC 121-Money and Banking Chapter 2 Lecture otes Professor Jason Lee I. Introduction In economics, investment is defined as an increase in the capital stock. This is important
CHAPTER 9 DEBT SECURITIES by Lee M. Dunham, PhD, CFA, and Vijay Singal, PhD, CFA LEARNING OUTCOMES After completing this chapter, you should be able to do the following: a Identify issuers of debt securities;
a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...
ASPE AT A GLANCE Section 3856 Financial Instruments December 2014 Section 3856 Financial Instruments Effective Date Fiscal years beginning on or after January 1, 2011 1 SCOPE Applies to all financial instruments
Robert W. Baird & Co. Incorporated Important Information about Investing in Bonds Baird has prepared this document to help you understand the characteristics and risks associated with bonds and other fixed
Note 29: Fair Value of Financial Instruments We record trading assets and liabilities, derivatives, available-for-sale securities and securities sold but not yet purchased at fair, and other non-trading
Investment and Portfolio Management Ms. Pham Le Thu Nga Lecture 8 Bond Prices and Yields Chapter 14 14-2 Bond Characteristics Face or par value (normally bullet maturity) Coupon rate (normally fixed) Zero
Chapter 3 - Selecting Investments in a Global Market Questions to be answered: Why should investors have a global perspective regarding their investments? What has happened to the relative size of U.S.
FIN 534 Week 4 Quiz 3 (Str) Click Here to Buy the Tutorial http://www.tutorialoutlet.com/fin-534/fin-534-week-4-quiz-3- str/ For more course tutorials visit www.tutorialoutlet.com Which of the following
Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding
Chapter 13 Investing in Bonds 13.1 Evaluating Bonds 13.2 Buying and Selling Bonds 2010 South-Western, Cengage Learning Standards Standard 4.0 Investigate opportunities available for saving and investing.
20. Investments 4: Bond Basics Introduction The purpose of an investment portfolio is to help individuals and families meet their financial goals. These goals differ from person to person and change over
NATURE AND SPECIFIC RISKS OF THE MAIN FINANCIAL INSTRUMENTS The present section is intended to communicate to you, in accordance with the Directive, general information on the characteristics of the main
AMP Capital Understanding Fixed Income a glossary Welcome to our educational series Understanding Fixed Income a glossary About fixed income at AMP Capital As one of the largest and most experienced fixed
REVISED 11-01-96 PAGE 6280 G. INVESTMENTS Other common investment vehicles include stocks and CONTRACTS bonds and contracts refer to promissory notes, loans and property agreements. 1. Stocks Shares of
FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest
investor s guide BOND BASICS CONTENTS What Are Bonds? 1 Why Invest in Bonds? 1 Key Bond Investment Considerations 2 How to Invest 13 Investment Strategy Considerations 17 For More Information 19 Glossary
Chapter 3 How Securities are Traded Primary vs. Secondary Security Sales Primary: When firms need to raise capital, they may choose to sell (or float) new securities. These new issues typically are marketed
Finance for Cultural Organisations Lecture 5. Interest Rates and Bond Valuation Lecture 5: Interest Rates and Bond Valuation Know the important bond features and bond types Understand bond values and why
NATIONAL STOCK EXCHANGE OF INDIA LIMITED Capital Market FAQ on Corporate Bond Date : September 29, 2011 1. What are securities? Securities are financial instruments that represent a creditor relationship
Answers to Review Questions 1. The real rate of interest is the rate that creates an equilibrium between the supply of savings and demand for investment funds. The nominal rate of interest is the actual
Review for Exam 1 Instructions: Please read carefully The exam will have 25 multiple choice questions and 5 work problems covering chapter 1, 2, 3, 4, 14, 16. Questions in the multiple choice section will
Chapter 4 Bonds and Their Valuation ANSWERS TO END-OF-CHAPTER QUESTIONS 4-1 a. A bond is a promissory note issued by a business or a governmental unit. Treasury bonds, sometimes referred to as government
Tax-exempt municipal bonds Fixed-income securities generally exempt from taxes Attractive benefits Tax-exempt municipal bonds are among the most popular types of investments available today. They offer
DESCRIPTION OF FINANCIAL INSTRUMENTS AND INVESTMENT RISKS A. General The services offered by Prochoice Stockbrokers cover a wide range of Financial Instruments. Every type of financial instrument carries
A guide to investing in hybrid securities Before you make an investment decision, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification
91. A high yield bond fund states that through active management, the fund s return has outperformed an index of Treasury securities by 4% on average over the past five years. As a performance benchmark
1.1 Callable bonds A callable bond is a fixed rate bond where the issuer has the right but not the obligation to repay the face value of the security at a pre-agreed value prior to the final original maturity
General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without
Condensed Interim Consolidated Financial Statements of Canada Pension Plan Investment Board December 31, 2015 Condensed Interim Consolidated Balance Sheet As at December 31, 2015 (CAD millions) As at December
PROSPECTUS M The Options Clearing Corporation PUT AND CALL OPTIONS This prospectus pertains to put and call security options ( Options ) issued by The Options Clearing Corporation ( OCC ). Certain types
TRADING BONDS ON THE LONDON STOCK EXCHANGE A GUIDE FOR PRIVATE INVESTORS The new electronic order book for retail bonds Contents Introduction 3 What are bonds? 3 Bond basics 4 Types of bond issuer 5 Bond
(unaudited) 1. SCOPE OF APPLICATION Basis of preparation This document represents the Basel Pillar 3 disclosures for Canadian Tire Bank ( the Bank ) and is unaudited. The Basel Pillar 3 disclosures included
Introduction to Fixed Income (IFI) Course Syllabus 1. Fixed income markets 1.1 Understand the function of fixed income markets 1.2 Know the main fixed income market products: Loans Bonds Money market instruments
ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 Investment Adviser: RidgeWorth Investments A Shares C Shares I Shares Aggressive Growth Allocation Strategy SLAAX CLVLX CVMGX Conservative
Review for Exam 1 Instructions: Please read carefully The exam will have 20 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation
APPROVED by Resolution No. 11 of 27 October 2004 of the Standards Board of the Public Establishment the Institute of Accounting of the Republic of Lithuania 18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS
Robert W. Baird & Co. Incorporated Important Information about Closed-End Funds and Unit Investment Trusts Baird has prepared this document to help you understand the characteristics and risks associated
INTERACTIVE BROKERS DISCLOSURE STATEMENT FOR BOND TRADING THIS DISCLOSURE STATEMENT DISCUSSES THE CHARACTERISTICS AND RISKS OF TRADING BONDS THROUGH INTERACTIVE BROKERS (IB). BEFORE TRADING BONDS YOU SHOULD
Bond Valuation FINANCE 350 Global Financial Management Professor Alon Brav Fuqua School of Business Duke University 1 Bond Valuation: An Overview Bond Markets What are they? How big? How important? Valuation
High-yield bonds Bonds that potentially reward investors for taking additional risk Types of high-yield bonds Types of high-yield bonds include: Cash-pay bonds. Known as plain vanilla bonds, these bonds
Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Credit is the lifeblood of South Louisiana business, especially for the smaller firm. It helps the small business owner get started, obtain equipment, build inventory,
Bond Valuation Capital Budgeting and Corporate Objectives Professor Ron Kaniel Simon School of Business University of Rochester 1 Bond Valuation An Overview Introduction to bonds and bond markets» What
OAKTREE HIGH YIELD BOND FUND Institutional Class OHYIX Advisor Class OHYDX Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its risks.
CONSOLIDATED STATEMENT of FINANCIAL CONDITION PURSUANT to RULE 17a-5 of the SECURITIES and EXCHANGE COMMISSION As of June 30, 2010 30 HUDSON STREET JERSEY CITY, NJ 07302 CONSOLIDATED STATEMENT OF FINANCIAL
Chapter 6 Interest Rates And Bond Valuation Learning Goals 1. Describe interest rate fundamentals, the term structure of interest rates, and risk premiums. 2. Review the legal aspects of bond financing
Arkansas Development Finance Authority, a Component Unit of the State of Arkansas Combined Financial Statements and Additional Information for the Year Ended June 30, 2000, and Independent Auditors Report
Investing in Bonds - An Introduction By: Scott A. Bishop, CPA, CFP, and Director of Financial Planning What are bonds? Bonds, sometimes called debt instruments or fixed-income securities, are essentially
REAL ESTATE BASICS Affordability Analysis An analysis of a buyer s ability to afford the purchase of a home, reviews income, liabilities, and available funds, and considers the type of mortgage a buyer
Chapter 2 Practice Problems MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assume that you borrow $2000 at 10% annual interest to finance a new
The Pinnacle Funds Simplified Prospectus December 11, 2009 Class A and Class F units and Class I units where noted Money Market Fund Pinnacle Short Term Income Fund Bond Funds Pinnacle Income Fund Pinnacle
Daily Income Fund Retail Class Shares ( Retail Shares ) Money Market Portfolio Ticker Symbol: DRTXX U.S. Treasury Portfolio No Ticker Symbol U.S. Government Portfolio Ticker Symbol: DREXX Municipal Portfolio
Daily Income Fund Retail Class Shares ( Retail Shares ) Money Market Portfolio Ticker Symbol: DRTXX U.S. Treasury Portfolio No Ticker Symbol U.S. Government Portfolio Ticker Symbol: DREXX Municipal Portfolio
City National Rochdale High Yield Bond Fund a series of City National Rochdale Funds SUMMARY PROSPECTUS DATED JANUARY 31, 2015, AS SUPPLEMENTED MAY 1, 2015 Class: Institutional Class Servicing Class Class
FAQ 1. What is a Bond & Sukuk? Bonds or Sukuk are fixed income security or debt security issued by companies or governments (the issuer) to raise funds to meet their financing needs. A bond that is issued
SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES (Issued April 1999) The standards, which have been set in bold italic type, should be read in the context of
BMO Mutual Funds 2015 SEMI-ANNUAL FINANCIAL STATEMENTS BMO Select Trust Conservative Portfolio NOTICE OF NO AUDITOR REVIEW OF THE SEMI-ANNUAL FINANCIAL STATEMENTS BMO Investments Inc., the Manager of the
SCHEDULE 1 RISK BASED CAPITAL REQUIREMENTS This schedule sets out the Risk Based Capital Requirements for the purposes of Rule 5.1. A Participant subject to the Risk Based Capital Requirements must comply
1.0 Purpose The purpose of this Debt Management Policy ( Policy ) is to establish parameters and provide guidance as to the issuance, management, continuing evaluation of and reporting on all debt obligations.
GUIDE TO INVESTING IN MARKET LINKED CERTIFICATES OF DEPOSIT What you should know before you buy What are Market Linked CDs? are a particular type of structured investment issued by third-party banks. A
GUARDIAN CANADIAN BOND FUND FINANCIAL STATEMENTS DECEMBER 31, 2010 March 11, 2011 PricewaterhouseCoopers LLP Chartered Accountants PO Box 82 Royal Trust Tower, Suite 3000 Toronto-Dominion Centre Toronto,
BRANDES Brandes Core Plus Fixed Income Fund Class A BCPAX Class E BCPEX Class I BCPIX Brandes Credit Focus Yield Fund Class A BCFAX Class I BCFIX Prospectus January 30, 2015 The U.S. Securities and Exchange
Catalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015 Before you invest, you may want to review the Fund s complete prospectus, which
Marquette University College of Business Administration Department of Finance FINA 189 Fixed Income Securities Syllabus Fall 2007 M W 2:25 p.m. 3:40 p.m. 388 Straz Hall Instructor: David S. Krause, PhD
SHARES NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE PowerShares Senior Loan Portfolio PowerShares Senior Loan Portfolio is the first senior loan exchange-traded fund (ETF) and seeks investment results
A Accrued Interest - Interest that has been earned but not yet credited to a bond or other fixed-income investment, such as a certificate of deposit. Active Management The use of professional investment
Equity Ownership interest in a corporation in the form of common stock or preferred stock. Common Stock American Depositary Receipts (ADR) Global Depositary Receipts (GDR) Exchange Traded Funds (ETF) As
INFORMATION TO CLIENTS REGARDING THE CHARACTERISTICS OF, AND RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (SHARES, SHARE-RELATED INSTRUMENTS AND BONDS) The client fully understands: that investments are