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.

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.

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

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.

Loan is a process of lending money to the borrower in exchange of future repayments. Loan may be secured in case of a housing loan or unsecured in cash of a credit card.

A lock-up period is a window of time when investors are not allowed to redeem or sell shares of a particular investment.

Market Linked Debentures are non-convertible debentures wherein the returns are not fixed however they are linked to the market. The returns are determined on the performance of the underlying index.

Prevailing interest rate offered is called the market interest rate. It is driven by multiple factors like flow of funds, duration of deposits, central bank interest rates, and size of deposits.

Masala bonds are rupee denominated bonds issued outside India by Indian companies/government. In such bonds, the risk of currency fluctuation is transferred to the bondholder.

Maturity Date refers to the date on which the issuer must repay the principal at face value and remaining interest. The maturity date determines the term that categorizes debt securities.

Modified duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates.

A mortgage-backed security (MBS) is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them.

Municipal bonds are issued by the government in order to raise money for projects like Airports, Railways, Schools etc.

A professionally management investment fund wherein the money is pooled in from a group of investors and invested in across various asset classes like stocks, bonds etc.

A characteristic of callable or prepayable securities that causes investors to have their principal returned sooner than expected in a declining interest rate environment.

Net prices refers to the final price to the paid to acquire the asset net of taxes and interest payments.

A bond that cannot be called for redemption at the option of the issuer before its specified maturity date.

An odd lot refers to an order amount for a security that is less than the normal unit of trading for an asset, which is typically 100 shares for stocks.

Original delivery also known as initial delivery is the day of delivery of new issued instruments to the investor.

A credit enhancement method wherein the principal amount of collateral (underlying security) exceeds the principal amount of loan.

OTC refers to the process of exchange of securities in a broker driver set up and not regulated via a registered stock exchange. They lack liquidity and transparency.

It is the nominal or face value of a bond. It is the static value determined at the time of issuance and unlike market value, it remains fixed throughout the tenor of the Bond.

Payment date is the date that actual principal and interest payments are paid to the registered owner of a security.

Perpetual Bonds can theoretically go on for as long as the issuer is a going concern. Though, these bonds have a “call” option, which enables the issuer to redeem the bond at the call date.

Positive yield curve is the interest rate structure which exists when long-term interest rates exceed short-term interest rates.

An equity security that is junior to the issuing entity's debt obligations but senior to common stock in the payment of dividends and the liquidation of assets.

When the price of a share or bond is trading above its face value, it is said to be trading at a premium. It is the difference between the price paid for a fixed-income security and its par value at issue.

Prepayment risk is the risk that falling interest rates will lead to heavy prepayments of mortgage or other loans, forcing the investor to reinvest at lower prevailing rates.

Present value states an amount of money today is worth more than that same amount in the future.

Price is the quantity of money/compensation given by one party to other in exchange for goods and services.

Primary market is a part of capital market wherein new securities are directly issued to the public for the first time.

Prime rate is a commercial bank's stated reference rate for lending.

Principal means the original or initial sum of money borrowed/invested. It is repaid at maturity in case of a bond.

Private placement is a round of funding wherein the securities are issues and money is raised not through a public offering. They are generally offered to institutions, friends and family.

Prospectus is a formal written offer document issued by the borrowing company stating all the terms of issuer and facts about the company in order to help the investor make an infromed decision.

PSU Bonds are medium and long term obligations issued by public sector companies in which the government shareholding is generally greater than 51%.

The investor has the right, before the expiration date, to seek redemption from the issuer. Put option gives the investor the right, if interest rates rise, to sell a low-coupon bond to the issuer.

Rating or credit rating is an opinion given by an independent credit rating agency about the ability to fulfil its obligations in a timely manners and probability of default.

Real rate of return is the annual percentage of profit earned on an investment, adjusted for inflation. Therefore, it accurately indicates the actual purchasing power.

Recession is the downturn in economy of a large scale wherein the goods are valued more today than on a future date. It is the opposite of inflation.

Record date is the cut off date which is used to determined the who is eligible to receive the coupon payments. An investor must be listed on this day in order to be eligible for dividend payments.

Real yield is the annualised return a benchmark government bond generates once inflation is taken into account.

The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.

Refinancing is simplying restructuring the terms of the existing loan eg. Interest rate, tenure of the loan, payment schedule etc. Borrowers generally tend to refinance when the interest rate falls.

A registered owner is usually the person or entity that is on the issuer records as being the legal owner of asset.

Repayment is the act of paying back money previously borrowed from a lender. Typically, the return of funds happens through periodic payments, which include both principal and interest.

Revenue, often referred to as sales or the top line, is the money received from normal business operations.

Risk is a measure of degree of uncertainity or financial loss inherient in an investment or decision.

Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand in their financial planning.

Secondary market is a platform wherein investors can free buy or sell bonds without the intervation of the issuing company.

Secured bonds are bonds wherein the issuer provides a specific asset as collateral for the bond. They carry a lower rate of interest as they are less risky as compared to unsecured bonds.

Settlement date is the date of delivery of the security and payment of funds.

Securities are fungible and tradable financial instruments used to raise capital in public and private markets.

Short position is a position wherein the investor borrows a security and then takes a sell position in anticipation of a price decline.

Short term debt is a debt with a maturity of less than one year.

Systematic risk refer to the risk that is inheritent to the entire market segment. It is also known as 'undiversificable risk' as it affects the entire market, not a specific company or sector.

Senior debt is borrowed money that a company must repay first if it goes out of business. It Is ranked highest in terms of repayment in case of liquidation of the company.

Settlement amount refers to the full and final amount that the buyer requires to pay in order to purchase the bond. It includes the Principal, Accured Interest and stamp duty charges if applicable.

A sovereign bond is a specific debt instrument issued by the government. They can be denominated in both foreign and domestic currency.

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. They are substitutes for holding physical gold.

Special Purpose Vehicles are separate entities formed to undertake a specific task or business activity. They are create to isolate financial risk. They have a separate assets and legal identity.

The difference between two prices, yields, or rates is called the spread. It is the gap between the bid and ask prices of a security or asset. Spread measures the liquidity of the asset .

Spread to Treasury is the difference between the Government benchamark yield and another fixed income security of a comparable maturity. The wider the spread, the riskier the asset.

Staggered Maturity Bonds simply represent bonds possessing different maturity. Investors generally purchase these bonds so that the money is not locked in one bond for a long time.

Stated Maturity is the last possible date on which the last payment of the longest maturity may be paid.

State Development Loans (SDLs) are debt instruments issued by states for meeting their market borrowings requirements/budgetary needs of state governments.

It's a bonus on top of a bond's standard coupon rate, indicated in basis points, that's triggered by a certain event or on a given date.

Separate Trading of Registered Interest and Principal of security (STRIPS) investors hold and trade the individual interest and principal components of eligible bond as separate securities.

A sub-broker is an agent who is associated with a trading member of the stock exchange. A sub-broker has to be registered with SEBI and a local stock exchange.

Subordinate bonds are debt instruments which are ranked lower than senior debt. In case of a companys liquidation, they are paid after the senior bondholder but before the preferred and common equity.

Superfloater is a CMO tranche which carries a floating rate of interest wherein the interest rate is linked to a underlying index rate.

Support Tranche is the tranche of CMO which absords the maximum impact of collateral prepayment variability in order to stabilse the principal repayments for PAC or TAC in the same tranche.

Supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.

Swap in a trading stratergy wherein the investor simultaneously purchases and sells the instruments in order to benefit tax rebates.

Syndicate is a group of people or corporations who have come together to transact some specific business, to promote or persue a shared common interest.

T Bill is a short term instrument issued by the government to meet its short term mismatches in revenue and expenditure.

T Bill rate is known as the weekly auction 3 months T Bill rate which is considered as the benchmark rate or Bond Equivalent Yield.

The discount from the list price allowed to a member of an underwriting account on any bonds purchased from the account.

Tax free bonds are usually the government securities wherein the interest is fully exempted from the Income Tax and shall not form part of the Total Income as per provisions under IT Act, 1961.

Term also refers to the tenure of the bond. The term to maturity is the length of time during which interest is paid.

It is a nonbinding agreement between the issuer and bondholder. It specifies the bond features such as maturity date, coupon, interest payment, liquidation preference, callability, and convertibility.

Tier 1 capital refers to the core capital held in a bank's reserves and is used to fund business activities for the bank's clients. It has two components: Common Equity Tier 1 and Additional Tier 1.

Tier 2 is the supplementary layer of a bank's capital contains revaluation reserves, hybrid instruments, and subordinated term debt. It is considered less secure and is more difficult to liquidate.

Trade date is the date on which the security has been bought or sold on record. This does not denote the date of transfer or settlement.

Tranches are created by spiliting up a pool of security generally debt instruments like bonds and mortgages in order to be sold to different investors.

Transparency is the concept of not hiding any important information from the public/parties involved in a transaction.

Treasury Bills are short term money market instruments issued by Central Government with a maturity of one year or less. They are generally issued at a discount.

True Yield is the rate of return earned by the bondholders considering the payment of capital gains at maturity.

Trust agreement is a legal documented agreement between the Trust and the issuer wherein the terms and responsibilities of both the parties are written down.

Trustee is a bank or financial institution appointed by the issuer who acts as the custodian of funds and official representative of bondholders. Trustee are appointed in the interest of the bondholder.

Term to Maturity refers to the number of years remaining for the bond to mature from the date of purchasing the instrument.

Unsecured Bonds are bonds which are not backed by an underlying asset. They generally provide a higher coupon rate to the investors as they are more risky than normal bonds.

Valuation is a quantitative process of determining the fair value of an asset or a firm.

Volatility is a statistical measure of risk. It defines the variation of a trading price/yield over time. In most cases, higher the volatility, riskier the security.

The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.

The weighted average number of months to the final payment of each loan backing a mortgage security, weighted by the size of the principal loan balances.

Yield is the effective rate of interest on the bond as on date. It is inversely related to the Price of the Bond.

Yield Curve is a line formed by plotting all bonds having the same credit rating but different maturity. A yield curve could be normal, inverted or flat. A normal line indicates a growing economy.

Yield Spread can be referred to the difference between the yields of two bonds issued by same or different issuer or bonds having a different rating or maturity date.

Yield to Call is the return earned if the Bond is held till the Call Date. The Call Date is the date at which the issuer has the option to redeem the bonds before maturity.

Yield to Maturity or the IRR of the Bond is the total yield earned if the bond is held to maturity. It includes earning from coupon payments and capital appreciation.

Yield to Worst is the lowest yield that could be earned on the bond assuming the bond would not default. This helps investors understand the minumum return that the bond would generate.

The rate of return an investor would earn if an investor buys a puttable bond at its current market price and hold it until the put date.

ZCB are Bonds that do not have any coupon/interest payments during the tenor of the Bond. They are generally sold at a discount and on the maturity date, the face value is repaid to the bond holder.

Z Tranche is the generally the last round of funding in CMO, wherein the bondholders recieves no interest payment for an extended period of time till the previous tranche payments are cleared.