Stock market indices are typically used to measure the performance of a particular stock market and with each component or segment benchmarking their performance against it. A capitalization-weighted index is a similar concept that accounts for each component of the index with respect to its market capitalization. Market capitalization (or simply market cap) is a

Bond convexity is the analysis of risk that arises with a change in the interest rate. Bond prices move inversely with a change in interest rate. The relationship between a bond price and interest rate is linear. However, the actual effects include several other factors resulting in a curvature. Convexity is used to assess the

A callable bond also called a redeemable bond, can be called by the issuer before the maturity date. Most bonds issued are callable bonds by default. However, callable bonds come with an embedded call feature that investors are aware of. Bond issuers issue callable bonds in a high-interest rate market and expect to lower interest

STRIPS comes from the acronym of “Separate Trading of Registered Interest and Principal Securities”. Treasury notes and bonds can be stripped to repackage their interest and principal payments. Usually, a zero-coupon bond issued by the US treasury is termed as a STRIPS instrument. Institutional investors like pensions funds, banks, and corporations invest in US Treasuries

Perpetual bonds are bonds that are issued with no maturity date. These bonds are also called “Perps” or “consol,”. As the name suggests, these bonds can work for perpetuity. Investors would receive coupon payments as long as they hold the investment in these bonds. These bonds present a fraction of the total bond market today.