Bonds & Fixed Income
5 terms
Debenture
Bonds & Fixed Income
qualitative
A debt instrument issued by a company, which in India may be secured against assets or unsecured.
Test: the instrument acknowledges a debt of the company and is issued under a debenture trust deed
Default
Bonds & Fixed Income
qualitative
A failure by a borrower to pay interest or principal when due, or a breach of another obligation under the debt agreement.
Test: a scheduled payment is missed beyond any grace period, or a covenant breach triggers an event of default
Dirty Price
Bonds & Fixed Income
₹
The total amount a buyer pays for a bond, including accrued interest since the last coupon.
Dirty Price = Clean Price + Accrued Interest
Discount Bond
Bonds & Fixed Income
₹
A bond trading below its face value, because its coupon is lower than the yield the market currently requires.
Test: Market Price < Face Value, which implies Yield to Maturity > Coupon Rate
Duration
Bonds & Fixed Income
years
A measure of how sensitive a bond's price is to a change in interest rates.
Approximate Price Change % = -Modified Duration x Change in Yield in percentage points