7.15.2005

Q&A: What's the trader referring to when he says...

... "6s of 1/1/2010 trading at 98"?

A bond that has a 6% coupon rate, matures at 1/1/2010 and is selling for 98% of its par value.

Bonus Points

  • A fixed income security is an obligation of the issuer who promises to pay a specified sum of money at a fixed future date in exchange for money now.
  • Par value: aka principal, face value, redemption value, maturity value. The amount that the issuer agrees to repay the bondholder by the maturity date.
    • may trade at a premium (above par) or at a discount.
  • Maturity: defines the remaining life of the bond.
    • the longer the maturity, the greater the price volatility (resulted from changes in IR)
    • defines 4 categories: Money market instruments (<= 1yr), Short-term notes ( 1yr< Mat <= 5yr), Intermediate-term bonds (5yr < Mat <= 12 years), and Long-term bonds (> 12yr)
  • Currency: A dollar-denominated issue makes payments to bondholders in US dollars. A dual-currency issue has coupon payments in one currency and principal payments in another.
  • Quoted as a percentage of its par value. ie. a price of 95 means 95% of the par value.

Category: C++ Quant > Debt

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