Pure yield pickup swap

Similar financial terms

Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.

Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected future rates. In other words, the entire term structure reflects the markets expectations of future short-term rates. For example, an increasing sloping term structure implies increasing short-term interest rates. Related: biased expectations theories

Pure-discount bond
A bond that will make only one payment of principal and interest. Also called a zero-coupon bond or a single-payment bond.

Pure Equity Trust
A special type of irrevocable trust marketed by promoters. The trust assets are obtained by an exchange of a certificate of beneficial interest in return for the assets, as opposed to traditional means, such as by gifting.

Pure Trust
A contractual trust as opposed to a statutory trust, created under the Common Law. A pure trust is one in which there must be a minimum of three parties(the creator or settlor (never grantor), the trustee and the beneficiary(and each is a separate entity. A pure trust is claimed to be a lawful, irrevocable, separate legal entity.

Yield to maturity
The total yield on a bond obtained by equating the bond's current market value to the discounted cash flows promised by the bond. Also referred to as actuarial yield or just yield.

Yield curve
The yield curve, which plots the term structure, shows the relationship between yield (interest rate) and maturity for a set of similar securities. Typically, different yield curves are drawn for zero-coupon bonds (zero-coupon yield curve) and for coupon bonds quoted at par (par yield curve).

Yield
In general, the yield is the return on an investor's capital investment. For bonds it is the coupon rate of interest divided by the purchase price, called current yield. Also, the rate of return on a bond, taking into account the total of annual interest payments, the purchase price, the redemption value, and the amount of time remaining until maturity.

Dividend yield
A stock's daily percentage summary of yield, calculated by dividing annual dividend per share by the day's closing stock price.

Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

Yield spread strategies
Strategies that involve positioning a portfolio to capitalize on expected changes inyield spreads between sectors of the bond market.

Yield ratio
The quotient of two bond yields.

Yield curve strategies
Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

Yield curve option-pricing models
Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.

Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.

Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).

Steepening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased.

Riding the yield curve
Buying long-term bonds in anticipation of capital gains as yields fall with the declining maturity of the bonds.

Required yield
Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk.

Reoffering yield
In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds to investors.

Relative yield spread
The ratio of the yield spread to the yield level.

Realized compound yield
Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.

Parallel shift in the yield curve
A shift in the yield curve in which the change in the yield on all maturities is the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as well.

Non-parallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same number of basis points for every maturity.

Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.

Bond equivalent yield
Bond yield calculated on an annual percentage rate method. Differs from annual effective yield.

Bond-equivalent yield
The annualized yield to maturity computed by doubling the semiannual yield.

Capital gains yield
The price change portion of a stock's return.

Convenience yield
The extra advantage that firms derive from holding the commodity rather than the future.

Coupon equivalent yield
True interest cost expressed on the basis of a 365-day year.

Current yield
For bonds or notes, the coupon rate divided by the market price of the bond.

Yield to worst
The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date.

Yield burning
A municipal bond financing method. Underwriters in advance refundings add large markups on US Treasury bonds bought and held in escrow to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. Since bond prices and yields move in opposite directions, when the bonds are marked up, they "burn down" the yield, which may violate federal tax rules and diminishes tax revenues.

Pickup
The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds.

Pickup
The enhancement in yield or income relative to a comparable treasury instrument.

Amortizing swap
An interest rate swap with a decreasing notional principal amount.

Volatility swap
A volatility swap is a financial instrument where the realized volatility during an accrual period is exchanged for a fixed volatility. Both percentage volatilities are applied to a notional principal.

Total return swap
A total return swap is an exchange of a return on a debt security for LIBOR plus a spread. The return on the debt security includes income such as coupons and the change in its value.

Swaption
A swaption is an option to enter into an interest rate swap where a specified fixed rate is exchanged for floating.

Swap rate
The fixed rate in an interest rate swap that causes the swap to have a value of zero. It can be thought of as the Internal Rate of Return (IRR) of a swap.

Swap
A swap is an agreement to exchange a series of variable cash flows for a fixed amount of cash flows in the future according to a prearranged formula.

Step-up swap
A swap where the principal increases over time in a predetermined way.

LIBOR-in-Arrears Swap
A swap where the interest paid on a date is determined by the interest rate observed on that date (not by the interest observed on the previous payment date).

Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates rise (decline).

Tax swap
Swapping two similar bonds to receive a tax benefit.

Swap sale
A swap sale (also referred to as a swap assignment) is a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.

Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

Swap buy-back
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.

Substitution swap
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but offers a higher yield.

Rate anticipation swaps
An exchange of bonds in a portfolio for new bonds that will achieve the target portfolio duration, based on the investor's assumptions about future changes in interest rates.

Put swaption
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Liability swap
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so as to provide a better match with its assets.

Call swaption
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating rate payer.

Circus swap
A fixed rate currency swap against floating U.S. dollar LIBOR payments.

Currency swap
An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency.