Convexity measures the curvature of the relationship between a bond's price and its yield. While duration tells you how much a bond's price will change for a given parallel shift in interest rates, it assumes this relationship is linear.Convexity
Risk and return
Duration: How It Works, Factors Affecting It, and Managing Duration Risk
Duration is more than just the length of time until a bond matures. It's a key measure quantifying a bond's sensitivity to interest rate fluctuations.Essentially, duration tells you how much a bond's price is likely to change when interest rates
Credit Spread: Why It Matters, Factors Affecting It, How to Profit From It
Credit spreads, the difference in interest rates between corporate and government bonds, offer significant risk and potential reward for fixed-income investors. By understanding how credit spreads reflect issuer risk, respond to market forces, and
Default Risk: Factors Affecting It, How to Assess and Mitigate in the Bond Portfolio
Default risk is a critical concern for fixed-income investors. Imagine this: You've carefully selected a bond, anticipating the steady stream of interest payments it promises. You're confident in its stability, picturing a reliable income
Credit Risk: Why It Matters, Types, How to Assess and Mitigate
Credit risk is the ever-present threat that a bond issuer may fail to fulfill its contractual obligations, such as repaying principal or making interest payments. Imagine this: You carefully selected a corporate bond drawn to its attractive yield.
Reinvestment Income: Compound Growth, Benefits and Strategies for Fixed-Income Investors
Imagine your investments working harder for you, automatically growing your wealth over time. This isn't a fantasy; it's the reality of reinvestment income.Reinvestment income refers to automatically taking the dividends, interest, and capital
Decoding Serial Maturity Structures: How They Work and Why They Matter for Investors
Serial maturity structures significantly impact the investment experience of bondholders. Unlike traditional bonds with a single maturity date, serial maturity structures involve gradually repaying bonds within an issue over time. This staggered
Bid-Ask Spread: The Hidden Costs of Bond Trading
Navigating the fixed-income market effectively requires a deep understanding of bid-ask spread. This seemingly small concept can significantly impact your investment returns and portfolio performance.The bid-ask spread represents the difference
Credit Quality: A Key to Maximizing Fixed-Income Returns
Understanding credit quality is not just crucial in fixed-income investing; it's paramount. It's the foundation upon which your investment decisions are built. Credit quality reflects an issuer's ability to consistently fulfill its financial
Exploring Different Bond Coupon Payment Structures: How They Impact Your Investments
A coupon payment is essentially the interest income you receive as a bondholder. When you invest in a bond, you are lending money to an issuer, such as a government or corporation. In return, the issuer promises to pay you regular interest payments,
Understanding Sinking Funds: How They Benefit You as a Fixed-Income Investor
Sinking funds are a crucial strategy for fixed-income investors, as they involve an organization setting aside funds over time to retire a debt obligation. By gradually paying down the debt, this proactive approach reduces the risk of default and
Principal Repayment: Types and Factors to Consider
Understanding how a bond's principal is repaid is essential for investors. The principal repayment structure significantly influences a bond investment's risk profile and potential returns.Key principal repayment structuresBonds are issued