An Introduction to the Bond Markets

Contents

Preface

Disclaimer

Introduction

1 What is a Bond and Who Issues Them?

1.1 Description of a bond

1.1.1 The issuer

1.1.2 Size and currency

1.1.3 Type

1.1.4 Coupon payments and frequency

1.1.5 Redemption amount and maturity dates

1.1.6 Embedded options

1.1.7 Guarantee

1.1.8 Where quoted and traded

1.2 The difference between corporate bonds and equities

2 Types of Bonds and Other Instruments

2.1 Fixed-rate bonds

2.1.1 Straight coupon bonds

2.1.2 Zero-coupon bonds

2.1.3 Undated or irredeemable bonds

2.1.4 Strippable bonds and strips

2.1.5 Bonds with sinking funds

2.1.6 Step-up or graduated-rate bonds

2.1.7 Annuities

2.2 Floating-rate notes

2.2.1 Undated or perpetual floating-rate notes

2.3 Index-linked bonds

2.4 Hybrid bonds

2.5 Other instrument types

2.5.1 Treasury bills

2.5.2 Certificates of deposit

2.5.3 Commercial paper

2.5.4 Medium-term notes

2.5.5 Preference shares

2.5.6 Permanent interest bearing shares

3 How Do You Price and Value a Bond?

3.1 Compound interest

3.2 Discounting and yield considerations

3.3 Accrued interest

3.4 How Bonds are quoted

3.5 Bond pricing

3.6 Yields and related measures

3.6.1 Current yield

3.6.2 Simple yield to maturity

3.6.3 Redemption yield

3.6.4 Life and duration

3.6.5 Modified duration

3.6.6 Convexity

3.6.7 Dispersion

3.7 Floating-rate notes

3.7.1 Simple margin (FRN)

3.7.2 Discounted margin (FRN)

3.8 Real redemption yield

3.9 Money market yields and discounts

4 Bond Options and Variants

4.1 Callable bonds

4.2 Putable bonds

4.3 Convertible ...