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An asset-backed security (ABS) is a security whose income payments, and hence value, are derived from and collateralized (or "backed") by a specified pool of underlying assets.

A bond fund or debt fund is a fund that invests in bonds, or other debt securities. Bond funds can be contrasted with stock funds and money funds. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than CDs and money market accounts. Most bon

The bond market (also debt market or credit market) is a financial market in which participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on for public and private expenditures. The bond market has largely been dominated by the United States

Bond valuation is the process of estimating the fair value of a bond. In the prevalent present-value approach, the value equals the sum of expected cash flows discounted at appropriate rates.

In finance, a default option, credit default swaption or credit default option is an option to buy protection (payer option) or sell protection (receiver option) as a credit default swap on a specific reference credit with a specific maturity. The option is usually European, exercisable only at one date in the future at a specific strike price defined as a coupon on the credit default s

Credit risk is the chance that a borrower does not repay a loan or fulfill a loan obligation. For lenders the risk includes late or lost interest and principal payment, leading to disrupted cash flows and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, me

Deferred financing costs or debt issuance costs is an accounting concept meaning costs associated with issuing debt (loans and bonds), such as various fees and commissions paid to investment banks, law firms, auditors, regulators, and so on. Since these payments do not generate future benefits, they are treated as a contra debt account. The costs are capitalized, reflected in the balance

A eurobond is an international bond that is denominated in a currency not native to the country where it is issued. They are also called external bonds. They are usually categorised according to the currency in which they are issued: eurodollar, euroyen, euroeuro and so on. The name became somewhat misleading with the advent of the euro currency in 1999; eurobonds were created in the 19

In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events but offer higher yields than investment-grade bonds to compensate for the increased risk.

An indenture is a legal contract that reflects an agreement between two parties. Although the term is most familiarly used to refer to a labor contract between an employer and a laborer with an indentured servant status, historically indentures were used for a variety of contracts, including transfers and rents of land and even peace agreements between rulers.

In finance, inflation derivative (or inflation-indexed derivatives) refers to an over-the-counter and exchange-traded derivative that is used to transfer inflation risk from one counterparty to another. See Exotic derivative.

An inflation swap is an over-the-counter derivative in which one party pays a fixed inflation rate and the other pays the realised change in a price index such as CPI, RPI or HICP. Markets trade two main structures: the zero-coupon inflation swap, which settles once at maturity, and the year-on-year inflation swap, which pays periodic coupons. Users include pension funds, insurers and ot

In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations with forward rate agreements (FRAs), and with zero coupon swaps (ZCSs).

Lottery bonds are a type of government bond in which some randomly selected bonds within the issue are redeemed at a higher value than the face value of the bond. Lottery bonds have been issued by public authorities in Belgium, Ireland, Pakistan, Sweden, New Zealand, the UK and other nations.

An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period. The OIS term is not overnight; it is the underlying reference rate that is an over

A perpetual bond, also known colloquially as a perpetual or perp, is a bond with no maturity date, therefore allowing it to be treated as equity, not as debt. Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore, those of a perpetuity.

A dual-currency note (DC) pays coupons in the investor's domestic currency with the notional in the issuer's domestic currency. A reverse dual-currency note (RDC) is a note which pays a foreign interest rate in the investor's domestic currency. A power reverse dual-currency note (PRDC) is a structured product where an investor is seeking a better return and a borrower a lower rate by tak

In finance, return is a profit on an investment. It comprises any change in value of the investment, and/or cash flows (or securities, or other investments) which the investor receives from that investment over a specified time period, such as interest payments, coupons, cash dividends and stock dividends. It may be measured either in absolute terms (e.g., dollars) or as a percentage of

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of secured short-term borrowing, usually, though not always, using government securities as collateral. A contracting party sells a security to a lender and, by agreement between the two parties, repurchases the security back shortly afterwards, at a slightly higher contracted price. The differe

A reverse convertible security is a type of convertible security where a bond or short-term note can be converted to cash, debt or equity at a set date by the issuer based on an underlying stock. In effect it is a type of option on the maturity date where the bond can be converted to shares or cash. For the investor they get the advantage of a steady stream of income due to the payment o

A risk-free bond is a theoretical bond that repays interest and principal with absolute certainty. The rate of return would be the risk-free interest rate. It is primary security, which pays off 1 unit no matter state of economy is realized at time

Short-term European paper (STEP) is a short-term financing instrument and investment tool, and also a tool for the European Union to align the market standards and practices to promote the integration of the European market. The EU has accepted the STEP market as a non-regulated market due to collateral purposes; meanwhile, this will not influence the existing national and European legis

A voucher is a bond which is worth a certain monetary value and which may be redeemed only for specific reasons or on specific goods.

In finance, a zero coupon swap (ZCS) is an interest rate derivative (IRD). In particular it is a linear IRD, that in its specification is very similar to the much more widely traded interest rate swap (IRS).

A zero-coupon inflation swap (ZCIS), also called a zero-coupon inflation-indexed swap (ZCIIS), is a standard derivative product whose payoff depends on the inflation rate realized over a given period of time. The underlying asset is a single consumer price index (CPI).