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Financial markets. The yield to maturity ( YTM ), book yield or redemption yield of a fixed-interest security is an estimate of the total rate of return anticipated to be earned by an investor who buys it at a given market price, holds it to maturity, and receives all interest payments and the capital redemption on schedule. [1] [2] It is the ...
The current yield, interest yield, income yield, flat yield, market yield, mark to market yield or running yield is a financial term used in reference to bonds and other fixed-interest securities such as gilts. It is the ratio of the annual interest ( coupon) payment and the bond's price :
Duration (finance) In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price ...
The "yield spread of X over Y" is generally the annualized percentage yield to maturity (YTM) of financial instrument X minus the YTM of financial instrument Y. There are several measures of yield spread relative to a benchmark yield curve, including interpolated spread , zero-volatility spread , and option-adjusted spread (OAS).
The yield to maturity (YTM) is the discount rate which returns the market price of a bond without embedded optionality; it is identical to (required return) in the above equation. YTM is thus the internal rate of return of an investment in the bond made at the observed price.
Floating rate notes ( FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like SOFR or federal funds rate, plus a quoted spread (also known as quoted margin ). The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months.
10 year minus 2 year treasury yield. In finance, the yield curve is a graph which depicts how the yields on debt instruments – such as bonds – vary as a function of their years remaining to maturity. [1] [2] Typically, the graph's horizontal or x-axis is a time line of months or years remaining to maturity, with the shortest maturity on the ...
Risk-free rate. The risk-free rate of return, usually shortened to the risk-free rate, is the rate of return of a hypothetical investment with scheduled payments over a fixed period of time that is assumed to meet all payment obligations. [1]