Fixed Income Investments Flashcards
Diversification
a risk management strategy that creates a mix of various investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt to limit exposure to any single asset or risk.
Fixed Income has low…
Correlation to equity market
Fixed-Income Securities
FEATURES of a fixed-income security include specification of:
* The issuer of the bond
* The maturity date of the bond
* The par value (principle value to be repaid)
* Coupon rate and frequency
* Currency in which payments will be made
The lower the correlation the…
greater the diversification benefit
Tenor
The time remaining until the bond’s maturity date
conventional bond
A bond with fixed coupon rate
Issuers of Bonds: Sovereign national government
example is U.S. Treasury bonds, but many countries issue sovereign bonds.
Issuers of Bonds: Corporations
Divided into those issued by financial companies and those missed by nonfinancial companies
Issuers of Bonds: Supranational entity bonds
Issued by organizations that operate globally such as the World
Bank, the European Investment Bank, and the International Monetary Fund (IMF).
Special Purpose Entities Bond
These are
Issuers of Bonds: Non-sovereign government
Issued by government entities that are not national governments, such as the state of California or the city of Toronto.
