Fixed Income Essentials
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Terms in this set
- Bond A debt security obligating the issuer to make periodic interest payments and repay principal at maturity.
- Coupon The periodic interest payment made by a bond, typically stated as an annual rate of the face value.
- Maturity The date on which the issuer must repay the bond's principal.
- Duration A measure of a bond's price sensitivity to interest rate changes — effectively the weighted average time to its cash flows.
- Convexity The curvature of the price-yield relationship — a second-order adjustment beyond duration.
- Spread The yield differential between a bond and a benchmark — typically over comparable-maturity government bonds.
- Default Failure by an issuer to meet a debt obligation — missing a payment, breaching a covenant, or filing for bankruptcy.
- Callable A bond the issuer can redeem before maturity at a specified call price.
- Indenture The legal contract between the issuer and bondholders, specifying terms, covenants, and default remedies.
- Treasury Sovereign debt issued by a national government — typically the benchmark risk-free rate in that currency.