Similar financial termsTerm to maturity
The term to maturity of a bond, commonly referred to as maturity or term, is the number of years over which the issuer has promised to meet the conditions of the obligation set out in the bond indenture. The maturity of a bond refers to the date that the debt will cease to exist, at which time the issuer will redeem the bond by paying the principal (or face value).
Bonds with a maturity of between one and five years.
Medium-term or intermediate-term bonds
Bonds with a maturity of between five and twelve years.
Bonds with a maturity of more than 12 years.
Short Term Gain
The profit realized from the sale of securities or other capital assets possessed for twelve months or less.
Volatility term structure
The volatility term structure is the variation of implied volatility with time to maturity.
The value at maturity.
Term structure of interest rates
The relationship between interest rates and their maturities.
Current portion of long-term dept
Those liabilities that are payable within the next 12 months, including accounts and taxes payable, and the current portion (12 months' payments) of notes payable and current liabilities.
Terms of trade
The weighted average of a nation's export prices relative to its import prices.
Terms of sale
Conditions on which a firm proposes to sell its goods services for cash or credit.
A closed-end fund that has a fixed termination or maturity date.
Excess of the yields to maturity on long-term bonds over those of short-term bonds.
A repurchase agreement with a term of more than one day.
Provides a death benefit only, no build-up of cash value.
A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule.
Term life insurance
A contract that provides a death benefit but no cash build-up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term.
Term Fed Funds
Federal funds sold for a period of time longer than overnight.
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and urban renewal agencies.
Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (a) the current ratio, (b) the acid-test ratio, (c) the inventory turnover ratio, and (d) the accounts receivable turnover ratio.
Short-term investment services
Services that assist firms in making short-term investments.
Short-term financial plan
A financial plan that covers the coming fiscal year.
Other long term liabilities
Value of leases, future employee benefits, deferred taxes and other obligations not requiring interest payments that must be paid over a period of more than 1 year.
Medium-term note (MTN)
A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.
Long-term debt to equity ratio
A capitalization ratio comparing long-term debt to shareholders' equity.
Amount owed for leases, bond repayment and other items due after 1 year.
Long-term financial plan
Financial plan covering two or more years of future operations.
Long-term debt ratio
The ratio of long-term debt to total capitalization.
Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity.
An obligation having a maturity of more than one year from the date it was issued. Also called funded debt.
Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect the market value of the assets.
In accounting information, one year or greater.
Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward rates will not be a pure estimate of the market's expectations of future interest rates because they embody a liquidity premium.
This is a document outlining the investment terms of a particular investment opportunity. It defines the terms and conditions of an investment, usually as dictated by an investor. It is the negotiating document that the parties must jointly agree to before a definitive investment agreement can be drafted.
Coefficient of determination
A measure of the goodness of fit of the relationship between the dependent and independent variables in a regression analysis; for instance, the percentage of variation in the return of an asset explained by the market portfolio return.
Institutions which channel funds from people and institutions wishing to lend to those wishing to borrow.
An elevator located at a point of greatest accumulation in the movement of agricultural products which stores the commodity or moves it to processors.
Usually synonymous with commodity exchange or futures market, specifically in the United Kingdom.
The holder of a zero-coupon bond realizes interest by buying the bond at a discount to its principal value. These bonds made their debut in the U.S. bond market in the early 1980s.
Bonds that let the issuer avoid using cash to make interest payments for a specified number of years. There are three types of deferred-coupon structures: (a) deferred-interest bonds, (b) step-up bonds and (c) payment-in-kind bonds.
Call feature on bonds
A call feature grants the issue the right to retire the debt, fully or partially, before the scheduled maturity date. Inclusion of a call feature benefits bond issuers by allowing them to replace an old bond issue with a lower-interest cost issue if interest rates in the market fall.
Put provision on bonds
A put provision grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. Here the advantage to the investor is that if interest rates rise after the issue date, thereby reducing a bond’s price, the investor can force the issuer to redeem the bond at par value.
Interest-rate risk on bonds
The price of a typical bond will change in the opposite direction from a change in interest rates. As interest rates rise, the price of a bond will fall; as interest rates fall, the price of a bond will rise. The actual degree of sensitivity of a bond’s price to changes in market interest rates depends on various characteristics of the issue maturity, coupon and special provisions.
Reinvestment risk on bonds
Usually, when the yield of a bond is calculated, you assume that the coupons received before maturity are reinvested. The additional income from such reinvestment is sometimes referred to as interest-on-interest which depends on the prevailing interest-rate levels at the time of reinvestment. Volatility in the reinvestment rate of a given strategy because of changes in market interest rates is called reinvestment risk. This risk is that the interest rate at which interim cash flows can be reinve ...
Call risk on bonds
Many bonds include a call feature that allows the issuer to redeem or “call” all or part of the issue before the maturity date. The issuer usually retains this right in order to have flexibility to refinance the bond in the future if the market interest rate drops below the coupon rate. This implies three risks from the investor: (a) The cash flow pattern becomes uncertain, (b) The investor becomes exposed to reinvestment risk because the issuer will call the bond when interest rates drop, and ( ...
Default risk on bonds
Issuers that potentially run into cash flow problems, simultaneously attaches default risk to their bonds if there is uncertainty whether they can afford to pay coupons and principals. Bonds with default risk trade in the market at a price that is lower than comparable U.S. Treasury securities, which are considered free of default risk. Default risk is gauged by quality ratings assigned by recognised rating companies such as Moody’s Investor Service, Standard & Poor’s Corporation, Morningstar an ...
Bonds that trade below investment grade set by recognised rating companies such as Moody’s Investor Service (Baa3), Standard & Poor’s Corporation (BBB), Morningstar and Fitch IBCA.
Inflation risk on bonds
If investors purchase a bond on which they can realize a coupon rate of 5% but the rate of inflation is 6%, the purchasing power of the cash flow actually has declined. Inflation risk arises because of the variation in the value of cash flows from a security due to inflation, as measured in terms of purchasing power.
Exchange-rate risk on bonds
A non-domestic-currency nominated bond has unknown domestic currency cash flows. The domestic currency cash flows are dependent on the exchange rate at the time the payments are received. For example, suppose that a German investor purchases a bond whose payments are in British pounds (GBP). If pounds depreciate relative to euros (EUR), fewer euros will be received and vice versa. This risk is also referred to currency risk.
Liquidity risk on bonds
The primary measure of liquidity is the size of the bid-ask spread. Liquidity risk depends on the ease with which an issue can be sold at or near its value. It follows that the wider the dealer spread, the more liquidity risk.
Brady bonds are issued by emerging countries under a debt-reduction plan named after former U.S. Secretary of the Treasury Nicholas Brady. Brady bonds were set up in association with the IMF and World Bank to sponsor the restructuring of outstanding sovereign loans and interest arrears into liquid debt instruments.
The conventional bonds form the largest part of the UK gilt market. 73% of bonds oustanding are in this form. COnventional bonds have a fixed coupon and a bullet (i.e. a fixed) maturity. Current coupons range from 2% to 13.5%. At the moment (2004), the longest outstanding maturity is 2036.
Bonds with a fixed maturity but not subject to prior redemption; bonds that cannot be called for redemption by the issuer (payer or obligor) before maturity. They should not be confused with perpetual bonds or intermediate bonds. UK Irredeemable (undated) bonds have no final maturity date. They are callable by the government at any time within 3 months. As their coupons range between 2.5% and 4% they are unlikely to be called. War loan, issued by the UK government during the First World War ...
Yankee bonds are issued by foreign governments and corporations, are generally dollar denominated, trade in the U.S., and must register with the Security and Exchange Commission. Issuers in the Yankee bond market are predominately highly-rated sovereign, or sovereign guaranteed issuers, although foreign corporations and financial institutions have increased issuance of Yankee bonds over the last decade.
Issuance in the Yankee bond market is dependent on U.S. interest rates, and the valu ...
Foreign bonds issued in Spain.
Foreign bonds issued in Netherlands.
Foreign bonds issued in Japan.
Foreign bonds issued in the United Kingdom.
Shogun bonds consist of foreign-currency bonds issued in Tokyo in currencies other that Japanese yen (JPY).
Yankee ECU bonds
Yankee ECU bonds refers to foreign-currency bonds issued in New York or Chicago in currencies other that US dollar.
Bonds with short current maturities.
Corporate bonds arranged so that specified principal amounts become due on specified dates.
Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.
Collateral trust bonds
A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes, bonds, or other financial asset as security.
Bonds that can be converted into common stock at the option of the holder.
Debt obligations issued by corporations.
High-coupon bonds that sell at only at a moderate premium because they are callable at a price below that at which a comparable non-callable bond would sell. Cushion bonds offer considerable downside protection in a falling market.
General Obligation Bonds
Securities issued by municipalities. The source of revenue to pay the interest and principal is taxes. These securities are also known as full faith and credit issues because they depend on the municipality's capacity to tax. These issues are often considered to be more stable than Revenue Bonds.
The capital portion of a bond from which the coupons have been stripped. The holder of the strip bond is entitled to its par value at maturity, but not the annual interest payments.