An embedded option is a type of derivative that is included in a bond contract. The option gives the holder the right, but not the obligation, to buy or sell the underlying security at a specified price on or before a certain date. Embedded options are found in a variety of bonds, including corporate bonds, … Read more
A Z-Bond is a type of bond that has a coupon rate that is reset periodically based on changes in a reference rate, typically an interest rate index. The reference rate is applied to a notional amount to determine the coupon payments. Z-Bonds are also known as floating rate bonds or variable rate bonds. What … Read more
A bond call protection is a type of bond provision that protects investors from the risk of a bond issuer calling a bond before its maturity date. This type of protection is typically found in bonds that have a call provision, which gives the issuer the right to call the bond before its maturity date. … Read more
Bond funds are mutual funds that invest in bonds and other debt instruments. Bond funds typically offer a higher degree of safety than equity funds, but they also usually have lower returns. Bond funds can be further classified according to the type of bonds they invest in, such as government bonds, corporate bonds, or high-yield … Read more
A fixed-income style box is a tool used by investors to help categorize and compare different types of fixed-income securities. The style box is split into four quadrants, each representing a different risk/return profile. The four quadrants are: 1. Treasury securities: These are the safest investments, with the lowest yields. 2. Government-sponsored securities: These are … Read more
A bid bond is a type of surety bond that is often required in the bidding process for government contracts. The bid bond protects the government entity from financial loss if the winning bidder fails to meet the terms of the contract. The bid bond is typically a small percentage of the total value of … Read more
The Trust Indenture Act of 1939 is a federal law that governs the issuance of certain types of bonds, including corporate bonds. The act requires that bonds be issued in accordance with a trust indenture, which is a contract between the issuer and the trustee. The trustee is responsible for safeguarding the interests of the … Read more
Gross yield is the interest rate earned on a bond before deducting taxes and other expenses. The gross yield is equal to the coupon rate divided by the bond’s price. For example, if a bond has a coupon rate of 10% and a price of $1,000, the gross yield is 10%. Is bond yield the … Read more
The term “above par” is used to describe a bond that is trading at a price above its face value. For example, if a bond has a face value of $1,000 and is trading at a price of $1,100, it is said to be trading “above par.” This means that the bond is trading at … Read more
A BOBL Futures Contract is a financial contract between two parties, in which one party agrees to buy a certain amount of a specific bond from the other party at a predetermined price, on a specified date in the future. The bonds that are traded under this contract are typically German Government Bonds (Bunds). Are … Read more
