The current value of your zero-coupon municipal bond, taking into account interest that has been accumulating and automatically reinvested in the bond.

Accrued Interest is the amount of interest which has been recognised (due) but is yet to be paid to the bondholder.

Active Tranche is that tranche of a collateralized mortgage obligation (CMO) which is actively paying out principal to an investor at any given time.

The price which the seller of the security is willing to accept the sale offer is referred to as the ask price or the offer price. The ask price will always be higher than the bid price.

Asset is a resource having an economic benefit which provides a future benefit. It can be owned by an individual, company or a country.

Asset Allocation is an investment stratergy where in assets are divided based on a percentage in order to reduce risk and maximise returns.

Additional Tier I Bonds (AT1 Bonds) are perpetual debt instruments i.e. they do not have a maturity date.They are generally issued by Banks for the purpose of maintaining their Capital Adequacy Ratio.

Auction is a sales event wherein potential buyers place competitive bids on assets or services either in an open or closed format.

Basis points (denoted as bps) is a standard interest rate and percentage measure. One basis points is equivalent to one hundreth of a percentage.

Bear market is a market condition wherein the market experiences prolonged asset price declines. An elongated bear market may led the economy into economic downturns like recessions.

Bearer Security is a security which does not mention the name of the owner. The person who holds the security is assumed to be the owner of the security. 

Benchmark yield is a standard market yield against which investment performance is measured. The benchmark yield for the Indian Bond market is the 10 Year G Sec Yield.

The highest price that the buyer is willing to pay for a security or an asset is called bid price. The process of negotiation between a seller and buyer leads to determining a bid price.

Bond is a fixed income instrument generally issued by companies or countries which provides stable and fixed returns to the bondholder. Bonds provide stability and diversity to a portfolio.

Bond Convexity is a measure of curvature of bond prices and bond yields. It measures how a change in interest rate would impact the duration of the bond.

Bond duration is a measure of change of bond prices due to a change in the interest rate.

Credit rating of a bond is an independent opinion provided by rating agencies. It indicates the likeliness of a company to default. Rating scale ranges from AAA(being the highest) to D (lowest).

Bond swap occurs when the investors sells one bond and purchases another bond of the same market value.

The Bondholder is the owner of the bond. He is entitled to regular interest and principal payment. The bondholder may be an individual or a entity eg. Mutual Funds, Banks etc.

The issuing entity or company raising money is known as the borrower. It raises money with a promise to pay regular interest payments and repay the face value on maturity.

A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange. He coordinates the purchase and sale of an asset on behalf of the customer.

Bull market is a market condition wherein the market experiences prolonged asset price increase. An elongated bull market indicates economic growth.

Bullet payment method is a repayment option wherein the issuer makes a lumpsum payment of the outstanding loan amount. It could also mean a single payment at maturity.

Call option gives the issuer the right but not the obligation to redeem the bond before its maturity date. Callable bonds usually pay a higher coupon rate than regular bonds.

An acquired asset which has an economic value and will provide financial benefit in the future.

Capital gain can be defined as any profit that is received through the sale of a capital asset. The profit that is received falls under the income category. Therefore, a tax needs to be paid on it.

Carry is the cost of borrowing funds in order to underwrite a trade position.

Cash flow is the movement of money in and out of the company/account. In Bond terms, cash flow is a payment schedule which indicates when the interest and principal payments are due.

Certificate of Deposit is a short term debt instrument generally issued by a bank wherein customers deposit lump sum money at a predetermined interest rate for a predetermined period of time.

A collateralized mortgage obligation (CMO) refers to a type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment.

Commerical paper is a short term debt instrument having a maturity of less than 1 year. It is an unsecured promissory note issues for matching short term revenue and expenditure mismatch in a company.

Consideration amount is the total amount to be paid by the investors in order to purchase/sell a bond. It includes clean price, accured interest and stamp duty(if applicable).

A convertible bond is a fixed-income instrument that yields interest payments, but can be converted into a predetermined number of common stock or equity shares on certain predefined conditions.

Convexity is the measure of the degree of curvature (curve) between bond yield and bond prices. 

Corporate bonds are issued by companies for raising finance for a variety of reasons such as for building a new plant, buying equipment or for business expansion. 

Corporate debt is debt raised by corporations. It could include any fixed income instrument raised by corporation eg. Commercial Papers, Bonds etc. 

Counterparty is the opposite (other) party which participates in a financial transaction. No transaction is possible without two parties involved. 

Coupon can be defined as the interest payment made on the bond by the issuer. 

The rate of interest paid by the bond issuers on the face value of the bond is called the coupon rate. It is calculated on the face value of the security and not on its issue price or market value. 

Covered Bonds are a hybrid between asset-backed securities/mortgage backed securities and normal secured corporate bonds. 

Credit Enhancement is a strategy to enhance the credit profile of a security/issuer. Examples of credit enhancement are overcollateralization, letter of credit, excess spread etc. 

Credit risk is the risk that the bank borrrower or counterparty will fail to meet its obligation in a timely manner i.e the borrower may not able to meet principal/interest payments. 

It is the increased yield received by an investor when investing in a corporate bond over risk-free government securities with similar maturities. It fluctuates depending on credit ratings and tenure. 

A creditor is a person or entity that extends credit by lending money to the borrower in exchange for timely future payments. They are of two type : Real eg Banka, FI or Personal eg. Friends, Family. 

Current yield is an investment's annual income divided by the current price of the security. However, current yield is not the actual return an investor receives if he holds a bond until maturity. 

Day count is the convention used to number of days in a interest payment schedule. Day count can be of various types 30/365, Actual/actual etc. 

Debentures are unsecured bonds issued by companies to raise money for long term activities and growth. 

Debt security is a contract wherein a person, company or government raises money from the lender in exchange for timely future payments. Bonds are the most common type of debt security. 

Debtholder or the lender is the investor who holds the debt instrument. They are essentially lending money to the issuer and have a claim on the underlying security in times of company bankruptcy. 

Bonds which are trading at a deep discount i.e. discount greater than the traditional discount provided in the market. 

Default is the failure of the borrower to fulfil an obligation eg. make timely interest or principal payment. 

The term derivative refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark. 

When the price of a share or bond is trading below its face value, it is said to be trading at a discount. The difference between the price paid for a security and its par value is discount. 

Diversification is a investment strategy wherein assets are invested across different asset classes, markets, geographical local in order to spread the risk amongst the portfolio. 

Downgrade risk is the risk arising from possibility of reduction in rating because of issuers financial condition. 

Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. 

Event Risk is the risk that a event will have a negative impact on the cash flow of the bond. 

ETF is a basket of securities (fund) which are traded on the exchange. They are traded on the exchange in a similar manner to a single security. 

The money repaid on maturity is known as the Par or Face value. Coupon payment is calculated as an percentage of Face Value. 

Fair value is a reference to the asset's price, as determined by a willing seller and buyer, and often established in the marketplace. 

Fixed rate bonds are debt instruments which contain a fixed coupon rate i.e the coupon rate is pre-determined and does not change during the tenure of the bond. 

Rate which increase or decreases, or floats, reflecting economic or financial market conditions. It is also known as variable interest rate as it varies during the bond tenure. 

Floating interest rate bonds are debt instruments wherein the coupon rate fluctuates with a change in the underlying security rate eg. 10 Year G Sec Rate, Repo rate etc. 

A foreign bond is a bond issued in a domestic market by a foreign entity in the domestic market's currency as a means of raising capital eg. Masala Bonds, Bulldog bond etc. 

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. 

Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. 

A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future. 

G-Sec in India is essentially a contract between the issuer and the investor, in which the Government (issuer) guarantees repayment of principal along with interest earning at a maturity date. 

These bonds are earmarked to raise money for climate and environmental projects like agriculture, fishery and forest etc. 

A financial guarantee is a type of promise given by a guarantor to take responsibility for the borrower in the case of default in payments to the lender or investor. 

Hedging is a risk management strategy wherein the investor takes an opposite position in the market in order to offset losses in investments. 

High-yield bonds (junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. They pay a higher interest rate to offset the higher risk. 

I owe you is usually an informal document acknowledging debt. It differs from a promissory note as it negotiable instrument and does not specify repayment terms such as the time of repayment. 

Indenture refers to a legal and binding agreement, contract, or document between two or more parties. 

Indexed Rate Bond are tax free bonds wherein the interest rate is linked to an index and perodically reset. 

Inflation is the decline of purchasing power of a given currency over time. It is measured by Consumer Price Index (CPI) and Wholesale Price Index (WPI). 

Inflation-linked bonds are bonds designed to help protect investors from inflation. They are indexed to inflation so that the principal and interest payments rise and fall with the rate of inflation. 

Inflation risk or the purchasing power risk refer to the risk that inflation would undermine the real value of the investment cash flows. 

Initial delivery also known as original delivery is the day of delivery of new issued instruments to the investor. 

Interest rate risk is the risk that arises from the fluctuation in the interest rates. The quantum of risk depends upon the sensitivity of the bond to the interest rates. 

The internal rate of return (IRR) is the annual rate of growth that an investment is expected to generate. 

Inverse Floater is a bond wherein the coupon rate is inversely related to the benchmark yield. Inverse floater carry interest rate risk. 

Investment grade bonds are bonds issued by corporations/government with a high credit rating. As they are less likely to default, they pay a lower coupon rate as compared to junk bonds. 

Any person who commits capital with the expectation of financial returns is an investor. 

An initial public offering (IPO) refers to the process of offering shares/bonds of a company to the public in a new issuance. An IPO allows a company to raise capital from public investors. 

An International Securities Identification Number (ISIN) is a 12-digit alphanumeric code that uniquely identifies a specific security. 

Issue date is the date on which the borrowing company issues an agreement/contract/security. 

Junior security is a security issued by a company wherein the claim on the company's asset is subordinate or lower than the normal security holders. 

Junk bonds are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. They pay a higher interest rate to offset the higher risk. 

A lender is an individual, a public or private group, or a financial institution that makes funds available to a person or business with the expectation that the funds will be repaid. 

A letter of credit is a commercial credit document issued by Banks used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. 

Leverage is the use of debt as an multiplier of investing power. 

LIBOR (London Interbank Offered Rate) is a globally accepted key benchmark interest rate for short term loans indicates borrowing costs between banks. 

A line of credit (LOC) is a preset borrowing limit that can be tapped into at any time. 

Liquidity refers to the ease of converting an asset to cash without affecting its market price. Cash is the most liquid asset. 

Liquidation value is the amount a securities holder may receive in case of a liquidation of the issuer. 

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