zero-coupon bond
description: a debt security that doesn't make periodic interest payments and is issued at a discount to its face value
72 results
Security Analysis
by Benjamin Graham and David Dodd · 1 Jan 1962 · 1,042pp · 266,547 words
bore little resemblance to that of today. There was no way to avoid uncertainty regarding the rate at which interest payments could be reinvested because zero-coupon bonds had not been invented. Bonds rated below investment grade couldn’t be issued as such, and the fallen angels that were outstanding had yet to
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of packages of securities and cash given to selling shareholders in acquisitions. The investment bank Drexel Burnham Lambert perfected this strategy, creating such instruments as zero-coupon bonds (paying no interest for, say, five years) or “pay-in-kind (PIK) preferreds,” which, instead of paying cash interest, just issued more preferred stock. Almost
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, 710n Yield: relationship with risk, 164–168 sacrificing safety for, 164–168 Youngstown Sheet and Tube Company, 244, 430, 461, 462, 476n, 501, 683 Z Zero-coupon bonds, 284 1 Losing money, as Graham noted, can also be psychologically unsettling. Anxiety from the financial damage caused by recently experienced loss or the fear
The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series)
by Robert P. Baker · 4 Oct 2015
. We have restricted the illustration of cashflows to three common types: a fixed coupon bond (Figure 3.10), a floater (Figure 3.11), and a zero coupon bond (Figure 3.12). Perhaps the simplest type of bond is one that pays fixed coupons. Here all the cashflows are known at the outset of
How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile
by Alexander Davidson · 1 Apr 2008 · 368pp · 32,950 words
, as distinct from the interest rate products covered in Chapter 11. We will focus on corporate bonds, international debt securities, junk bonds, asset-backed securities, zero-coupon bonds and equity convertibles. We will consider credit derivatives. Overview Credit products are integral to financial markets and help to fuel merger and acquisition activity, which
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net issues rose from US $205 billion to US $505 billion. Spain, France, Italy and others lost market share, while the Netherlands and Ireland gained. Zero-coupon bonds Zero-coupon bonds do not pay interest in their life. Investors buy them at a deep discount from par value, which they receive in full when the bond
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collateralised debt obligations 94–95 collateralised loan obligation 95 covered bonds 93 equity convertibles 93 international debt securities 92–93 304 INDEX ____________________________________________________ junk bonds 91 zero-coupon bonds 93 credit rating agencies 91 Credit Suisse 5, 136, 193 CREST system 141, 142–44 dark liquidity pools 138 Debt Management Office 82, 86 Department
Personal Investing: The Missing Manual
by Bonnie Biafore, Amy E. Buttell and Carol Fabbri · 24 May 2010 · 250pp · 77,544 words
-based days talked about “clipping coupons.” They would clip the paper coupons attached to their bonds and send them in to collect their interest payments. Zero coupon bonds work a little differently. First, instead of making regular interest payments, this type of bond pays one lump sum at maturity that combines interest and
The Money Machine: How the City Works
by Philip Coggan · 1 Jul 2009 · 253pp · 79,214 words
help the issuer to achieve a lower interest rate than would be possible with a conventional issue. One of the most prominent ‘variations’ is the zero-coupon bond, which, as its name suggests, pays no interest at all. Instead it is issued at a discount to its face value. Say it is issued
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capital gain; capital gains taxes are normally below the highest rates of income tax. If the investor is going to pay less tax on a zero-coupon bond, he will be willing to accept an interest rate effectively rather lower than that on a straight bond. Both investor and borrower thus benefit. It
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is possible to calculate the ‘interest’ on a zero-coupon bond, though this sounds an odd concept. Assume that the bond has a one-year maturity and a face value of £100, and that it is
Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives
by Satyajit Das · 15 Nov 2006 · 349pp · 134,041 words
), much higher than yen rates. The Japanese investors were keen on the high rates; specifically, they wanted to buy zero coupon bonds. Now in a normal bond you get regular interest payments and in a zero coupon bond, you get all your interest at the end. For example, let’s DAS_C08.QXP 8/7/06
Financial Modelling in Python
by Shayne Fletcher and Christopher Gardner · 3 Aug 2009 · 246pp · 16,997 words
is simply 0 C (s)ds and the local volatility is φ(t) − φ(T ). Note that, taken together with the relevant discount factors, any zero coupon bond can be written in terms of the local volatility and the term volatility. What we actually store in the environment for the term volatility is
Mathematical Finance: Theory, Modeling, Implementation
by Christian Fries · 9 Sep 2007
(S (T ) − K, 0) as a function of the strike K. We assume S (T ) ≥ 0. Let P(T ; 0) denote the value of the zero-coupon bond with nominal 1. From Lemma 74 we have for the mapping K 7→ V(K) (we write shortly V(K) for V(K; 0)), that
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, T 2 ] which we denote by P(T 2 ) : P(T 2 ) : [0, T 2 ] × Ω 7→ R. 3 4 The term defined is the zero-coupon bond (there are no intermediate payments (coupons) until maturity). We give the trivial extension to a coupon bond in Definition 97. See Remark 123. 128 This
Buffett
by Roger Lowenstein · 24 Jul 2013 · 612pp · 179,328 words
to unsound levels. After the $25 billion RJR Nabisco deal, he judged that this was a prophecy no more. Deal-makers were financing LBOs with “zero-coupon bonds,” a type of funny money that enabled buyers to borrow huge sums and defer their interest payments (and reality) for years. Given the ease with
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of the investors’ faith that Berkshire’s share price would continue rising. (They were betting on the lottery ticket.) What’s more, since these were “zero-coupon” bonds, Berkshire would owe interest, but not actually pay it, until the bonds matured, fifteen years later. But owing to a quirk in the tax laws
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that got you into trouble, for what the wise did in the beginning, “fools do in the end.”36 Thus it was with LBOs and zero-coupon bonds. As was his style in such essays, Buffett started small and in the distant past. He invited readers to “travel back to Eden, to a
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time when the apple had not yet been bitten.”37 If you’re my age you bought your first zero-coupon bonds during World War II, by purchasing the famous Series E U. S. Savings Bond, the most widely sold bond issue in history. Nobody called it
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up your wallet. Turn the tables by suggesting that the promoter and his high-priced entourage accept zero-coupon fees, deferring their take until the zero-coupon bonds have been paid in full. See then how much enthusiasm for the deal endures. Such essays, though, were guides to the broad strokes; of his
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, when Buffett stepped down from Salomon, Berkshire was at $9,100. In November, it broke $10,000. Late in the year, Buffett redeemed Berkshire’s zero-coupon bonds—a signal that he thought the stock was cheap. During 1993, it was as if traded by the gods. By Valentine’s Day, Berkshire had
The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders
by Connie Bruck · 1 Jun 1989 · 507pp · 145,878 words
can be issued more quickly and require less disclosure) and two public deals. One of them, issued for DWG back in 1982—$50 million of zero-coupon bonds (which are sold at a discount and pay no interest until the annual accreted interest is paid at maturity)—had a short maturity, due in
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enough money to meet its fixed charges out of cash flow, and like Metromedia it contained a healthy quantity of zero-coupon bonds (one third of the total) in its mix of securities. The zero-coupon bond was vital to these deals. Sold at a discount from its face value, it requires no interest payments (hence
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, “zero-coupon”) until maturity, when the annual accrued interest and the principal are paid out. Drexel had pioneered the heavy use of zero-coupon bonds in junk deals (especially in the communications industry) where the company in the foreseeable future could not make its interest payments. The day of reckoning
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Tandy, 45 Tappan, 155 Tax Equity and Fiscal Responsibility Act (TEFRA; 1982), 82 taxes, 200, 328 income, see income tax Scherer’s views on, 263 zero-coupon bonds and, 82 Tax Reform Act (1986), 263–64 tax shelters, 54, 313 Taylor, Elizabeth, 236 Taylor, John, 307 Technicolor, Inc., 198–201, 210, 235, 236
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