Fixed Income Flashcards
This term refers to the most important pries for gov’t bonds
On the run
Differences between convertible bonds and warrants?
Warrants are the right to buy a stock at a certain price until expiration and do NOT require retirement of bonds on warrant execution
What are the 3 styles of callable bonds?
American, European, Bermuda
What is a sinking fund provision?
Periodic retirement of a portion of bonds issued over the life of the issue. Less credit risk, more reinvestment risk
4 types of inflation indexed bonds
1) Indexed annuity
2) Zero coupon
3) Interest indexed
4) Capital indexed
What are Eurobonds?
Issued outside the jurisdiction of any one country and are denominated in its currency
Syndicated vs bilateral loan?
Bilateral only one bank, syndicated more than 1
Average commercial papers come due in __ days
90
Difference between serial bond issue and sinking fund provision?
Investors know when specific bonds come due for serial bond issues
What is a structured financial instrument?
Debt security combined with a derivative (asset backed, CDO’s)
Describe credit linked notes
Redemption value depends on if a credit event occurs (rating downgrade). Lower redemption value if credit event occurs, usually pays more interest to compensate
Participation instrument
Payments based on the value of an underlying interest rate, asset return, or index. Ex floating rate note
Sources of short term funding for banks
Customer deposits, checking/savings accounts, money market funds, certificates of deposit
Interbank funds vs Central bank funds rate
Place where banks borrow excess reserves from other banks
