What Is a Straight Bond? A straight bond is a bond that pays interest at regular intervals, and at maturity pays back the principal that was originally invested. A straight bond has no special features compared to other bonds with embedded options. U.S. Treasury bonds issued by the governmen...
Suppose A & B enters into a Swap Agreement for two years wherein A pays fixed (here A is short on a fixed coupon paying bond) at the rate of 4% and receives LIBOR from B. After one and a half years, both parties want to terminate the agreement immediately. A notional principal is ...
To determine a retractable bond’s price the value of the underlying debt must first be determined using thediscounted cash flow(DCF) approach. The put feature is then measured as the benefit of holding or exercising the embedded option usingoptions pricing modeling. This pricing method is the b...
Overview of what is a bond and why they are seen A bond is a long term debt security. It represents debt because the investors ac-tually lend the face amount to the bond is-suer. However, unlike loans, bonds can be traded in the open market, ie. the investor need not hold it to ...
Another advantage of bonds is that they usually offer higher interest rates than CDs. However, the reason for that is the key drawbacks of bonds. CDs are insured by the FDIC but bonds have no such protection. It's possible for the bond issuer to default, which would cause you to lose ...