Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA Level 1 > Fixed Income: Defining Elements > Flashcards

Fixed Income: Defining Elements Flashcards

You may prefer our related Brainscape-certified flashcards:
CFA flashcards
1
Q

Amortizing Bond

A

Bond with a payment schedule that calls for periodic payments of interest and repayments of principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Asset-Backed Securities

A

A type of bond issued by a legal entity called a special purpose entity (SPE) on a collection of assets that SPE owns. Also securities backed by recievables and loans other than mortgages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Balloon Payment

A

Large payment required at maturity to retire a bonds outstanding principal amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Basis Point

A

Used in stating yield spreads, one basis point equals one-hundredth of a percentage point, or .01%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Bearer Bonds

A

Bonds for which ownership is not recorders; only the clearing system knows who the bond owner is.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Bond

A

Contractual agreement between the issuer and the bondholders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Bullet Bond

A

Bond in which the principal repayment is made entirely at maturity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Callable bond

A

A bond containing an embedded call option that gives he issuer the right to buy the bond back from the investor at specified prices on pre-determined dates.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Capital market securities

A

Securities with maturities at issuance long than one year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Cash collateral account

A

Form of external credit enhancement whereby the issuer immediately borrows the credit-enhancement amount and then invests that amount, usually is in highly ratted short-term commercial paper.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Collateral Trust Bonds

A

Bonds secured by securities such as common shares, other bonds, or other financial assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Collaterals

A

Assets or financial guarantees underlying a debt obligation that above and beyond the issuers promise to the pay.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Contingency Provision

A

Clause in a legal document that allows for some action if a specified event or circumstance occurs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Contingent convertible bonds

A

Bonds that automatically convert into equity if a specific event or circumstance occurs, such as the issuer’s equity capital falling below the minimum requirement set by the regulators.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Conventional bond

A

Bond that makes periodic, fixed coupon payments during the bond’s life and a lump sum payment of principal at maturity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Conversion price

A

For a convertible bond, the price per share at which the bond can be converted from cash into shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Conversion ratio

A

For a convertible bond, or he number of common shares that each bond can be converted into.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Conversion Value

A

For a convertible bond, the current share price multiplied by the conversion ratio.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Convertible Bond

A

Bond that gives the bond holder the bond right to exchange the bond for a specified number of common shares in the issuing company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Covenants

A

The terms and conditions of lending agreements that the issuer must comply with; they specify the actions that an issuer is obligated to perform (affirmative covenant) or prohibited from performing (negative covenant).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Covered Bond

A

Debt obligation secured by a segregated pool of assets called the cover pool. The issuer must maintain the value of the cover pool. In the event of default, bondholders have recourse against both the issuer and the cover pool

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Credit enhancements

A

Provisions that may be used to reduce costs the credit risk of a bond issue.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Credit-linked coupon bond

A

Bond for which the coupon changes when the bonds credit rating changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Credit Tranching

A

A structure used to redistribute the credit risk associated with the collateral; A set of bond classes created to allow investors a choice in the amount of credit risk that they prefer to bear.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Currency Option Bonds

A

Bonds that give the bond holder the right to choose the currency in which he or she wants to receive interest payments and principal repayments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Current Yield

A

The sum of the coupon payment received over the year divided by the flat price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Debentures

A

Types of bond that can be secured or unsecured

28
Q

Deferred Coupon Bond

A

Bonds that pays no coupons for its first few years but then pays a higher coupon than it otherwise normally would be for the remainder of its life

29
Q

Dual currency bonds

A

Bonds that make coupon payments in one currency and pay the par value at maturity in another currency.

30
Q

Embedded Option

A

Contingency provisions that provide the issuer or the bondholders the right, but not the obligation, to take action. These options are not part of the security and cannot be traded separately.

31
Q

Equipment trust certificates

A

Bonds secured by specific types of equipment or physical assets

32
Q

Eurobonds

A

Type of bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated

33
Q

Floaters

A

A note on which interest payments are not fixed, but instead vary from period to period depending on the current level of a reference interest rate.

34
Q

Floating-rate notes

A

A note in which interest payments are not fixed, but instead vary from period to period depending on the current level of a referenced interest rate.

35
Q

Indenture

A

Legal contract that describes the form of a bond, the obligations of the issuer and the rights of the bondholders

36
Q

Index-linked bonds

A

Bond for which coupon payments and/or principal repayment are linked to a specified index.

37
Q

Inflation-linked bond

A

Type of index-linked bond that offers investors protection against inflation by linking the bonds coupon payments and or the principal repayment to an index of consumer prices

38
Q

Letter of credit

A

Form of external credit enhancement whereby a financial institution provides the issuer with a credit line to reimburse any cash flow shortfalls from the assets backing the issue.

39
Q

Linker

A

Type of index-linked bond that offers investors protection against inflation by linking the bond’s coupon payments and/or the principal repayment to an index of consumer prices

40
Q

London interbank offered rare (Libor)

A

Collective name for multiple rates at which a selected set of banks believe they could borrow unsecured funds from other banks in the London interbank market for different currencies and different borrowing periods ranging from overnight to one year

41
Q

Money market securities

A

Fixed-income securities with maturity at issuance of one year or less

42
Q

Mortgage-backed securities

A

Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property

43
Q

Overcollateralization

A

Form of internal credit enhancement that refers to the process of posting more collateral than needed to obtain or secure financing

44
Q

Perpetual bonds

A

Bonds with no stated maturity date.

45
Q

Plain vanilla bond

A

Bond that makes periodic, fixed coupon payments during the bond’a life and a lump-sum payment of principal at maturity

46
Q

Principal

A

The amount of funds originally invested in a project or instrument; the face value to be paid at maturity

47
Q

Principal Amount

A

Amount that an issuer agrees to repay the debt holders on maturity date.

48
Q

Principal Value

A

Amount that an issuer agrees to repay the debt holder on the maturity date.

49
Q

Pure discount bonds

A

Bonds that do not pay interest during the bonds life. It is issued at a discount to par value and redeemed at par.

50
Q

Putable bonds

A

Bonds that give the bond holder the right to sell the bond back to the issuer at a predetermined price on specified dates.

51
Q

Redemption yield

A

Annual return than an investor earns on a bond if the investor purchases the bond today and holds it until maturity. It is the discount rate that equates the present value of the bonds expected cash flows until maturity with the bonds price.

52
Q

Registered Bonds

A

Bonds for which ownership is recorded by either name or serial number.

53
Q

Reserve Accounts

A

Form of internal credit enhancement that relies on creating accounts and depositing in these accounts cash that can be used to absorb losses

54
Q

Reserve funds

A

Form of internal credit enhancement that relies on creating accounts and depositing in these accounts cash that can be used to absorb losses

55
Q

Running yield

A

The sum of the coupon payment received over the year divided by the flat price.

56
Q

Secured bonds

A

Bonds secured by assets or financial guarantees pledged to ensure debt repayment in case of default.

57
Q

Sinking Fund Arrangement

A

Provision that reduces the credit risk of a bond issue by requiring the issuer to retire a portion of the bonds principal outstanding each year.

58
Q

Split coupon bond

A

Bond that pays no coupons for its first few years but then pays a higher coupon than it otherwise normally would for the remainder of its life.

59
Q

Step-up Coupon

A

Bond for which the coupon, which may be fixed or floating, increases by specified margins at specified dates.

60
Q

Subordination

A

Form of internal credit enhancement that relies on creating more than one bond tranche and ordering the claim priorities for ownership or increases retest in an asset between the tranches. The ordering of the claim priorities is called a senior/subordinate structure, where the tranches of highest seniority are called senior followed by subordinated or junior tranches

61
Q

Surety Bond

A

Form of external credit enhancement whereby a rated and regulated insurance company guarantees to reimburse bondholders for any losses incurred up to maximum amount if the issuer defaults

62
Q

Tenor

A

The time-to-maturity for a bond or derivative contract.

63
Q

Trust Deed

A

The governing legal credit agreement, typically incorporated by reference in the prospectus.

64
Q

Warrant

A

Attached option that gives its holder the right to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date

65
Q

Yield to Maturity

A

Annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity it is the discount rate that equates the present value of the bond’s expected cash flows until maturity with the bonds price.

66
Q

Yield to redemption

A

Annual return that an investor earns on a bond if the investor purchases the bond today and holds it until maturity. It is the discount rate that equates the present value of the bonds expected cash flows until maturity with bonds price.

67
Q

Zero-Coupon bonds

A

Bonds that do not pay interest during a bonds life. It is issued at a discount to par value and redeemed at par.

CFA Level 1 (50 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions