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4 tips for investing in zero-coupon bonds. Consider your financial goals. The biggest thing to remember about zero-coupon bonds is that they’re intended to be long-term investments that don’t ...
A zero-coupon bond is a bond that does not pay interest or coupons, but only the face value at maturity. Learn about its features, uses, taxes, and examples of zero-coupon bonds and strip bonds.
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Dirty price is the price of a bond including any interest that has accrued since the last coupon payment. Learn how to calculate the dirty price, clean price, and accrued interest of a bond, and see an example of a corporate bond trade.
A zero coupon swap (ZCS) [1] is a derivative contract made between two parties with terms defining two 'legs' upon which each party either makes or receives payments. One leg is the traditional fixed leg, whose cashflows are determined at the outset, usually defined by an agreed fixed rate of interest.
An affine term structure model is a financial model that relates zero-coupon bond prices (i.e. the discount curve) to a spot rate model. It is particularly useful for deriving the yield curve – the process of determining spot rate model inputs from observable bond market data.
In finance, bootstrapping is a method for constructing a (zero-coupon) fixed-income yield curve from the prices of a set of coupon-bearing products, e.g. bonds and swaps. [ 1 ] A bootstrapped curve , correspondingly, is one where the prices of the instruments used as an input to the curve, will be an exact output , when these same instruments ...
It is zero-coupon because there is only one cash flow at the maturity of the swap, without any intermediate coupon. It is called a swap because at maturity, one counterparty pays a fixed amount to the other in exchange for a floating amount (in this case linked to inflation). The final cash flow will therefore consist of the difference between ...