Bond

Convertible bonds Convertible bonds are bonds that are convertible into ordinary (also known as common) shares at a pre-specified price at the option of the…

STRIPS is the acronym for Separate Trading of Registered Interest and Principal of Securities. These securities have existed in international bond markets for some years.…

Call bonds are also termed bonds with call provisions. Call bonds are plain vanilla bonds that have a call provision attached, i.e. the issuer has…

A zero coupon bond, as the name indicates, is a bond that does not have any coupon payments. An example follows (Figure): Nominal value:            LCC…

Inflation-linked bonds are also called index bonds. Their return is usually linked to the CPI (consumer price index) and as such is a variation of…

Floating rate bonds (also called “floating rate note” – FRN) contrasts with a fixed-rate bond. This bond usually has the same features as a plain…

Perpetual bonds are knows as perpetuities, consols, treasury annuities and undated treasuries. They have an English genesis and they contrast to fixed-term bonds. A perpetual…

Bearer bonds contrast to registered bonds. The plain vanilla bond in the example is a registered bond meaning that the name of the investor is…

A plain vanilla bond is a fixed-term, fixed-rate and registered bond. An example is presented in Box. Figure: example of cash flows of plain vanilla…

Inflation risk is the risk that the real rate of interest earned on a bond falls, due to inflation. For example, if an investor buys…