Bond Market

Advanced Risk Management Techniques in Bonds The bond market, also known as the debt market or credit market, is an important segment of the financial market where participants can issue or trade debt securities. Given the complexity and unforgiving nature of the bond market, effective risk management is paramount. There are various advanced risk management …

Understanding How STRIPS Work in Bond Markets Introduction to STRIPS The U.S. Treasury issued debt securities known as Separate Trading of Registered Interest and Principal of Securities (STRIPS), which are available for purchase through brokerage firms and financial institutions. They represent components of treasury securities, which have been separated or “stripped” into two parts: the …

Understanding How Perpetual Bonds Work A perpetual bond, also known as a perpetuity or a ‘consol’, is a special type of bond that has no maturity date; it goes on indefinitely; in theory, its payments continue perpetually. These bonds were introduced initially because governments wanted to fund their operations without worrying about repaying the principal …

Putable Bonds Explained Overview of Putable Bonds A putable bond, simply put, is a type of bond that grants the bondholder, or the investor, the right—but not the obligation—to demand early payment of the principal before the bond’s maturity date. The specifics of this right, including when and how it can be enacted, are outlined …

Understanding Callable Bonds Introduction to Callable Bonds A callable bond, also known as a redeemable bond, is a type of bond that allows the issuer the right but not the obligation to redeem the bond before its maturity date. The option to “call” the bond occurs under some predetermined terms. Simply put, they offer the …

Understanding The Concept of Exotic Bond Options To delve into how exotic bond options work, we first need to get a grasp on what the term means. An “exotic” bond option relates specifically to the complex and often diverse range of financial instruments structurally different from standard or “vanilla” options. Now, what are bond options …