Fairway Bond

AAA

DEFINITION of 'Fairway Bond'

A type of bond that accrues interest if the embedded index or interest-rate option underlying the bond remains within a specified range. The fairway in golf is like the index or interest rate range. The outlook is positive if the ball lands on the fairway; if a ball lands in the rough, the outlook is negative.


Also known as "corridor bond", "index range note", "range accrual note", or "index floater".

INVESTOPEDIA EXPLAINS 'Fairway Bond'

Conservative investors tend to choose this type of bond in the hope of maximizing their yield when they believe that the option will remain within a certain range during the time the bond is held. Investors may profit the most during a sideways market. Should the option remain out of range, the least the investor can expect is a return of principal.

RELATED TERMS
  1. Sideways Market / Sideways Drift

    A sideways market occurs where the price trend of a certain trading ...
  2. Double Barrier Option

    An option with two distinct triggers that define the allowable ...
  3. Accrued Interest

    1. A term used to describe an accrual accounting method when ...
  4. Index

    A statistical measure of change in an economy or a securities ...
  5. Index Option

    A financial derivative that gives the holder the right, but not ...
  6. Bond

    A debt investment in which an investor loans money to an entity ...
Related Articles
  1. Advanced Bond Concepts
    Bonds & Fixed Income

    Advanced Bond Concepts

  2. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

  3. Are Equity-Indexed Annuities Right For ...
    Savings

    Are Equity-Indexed Annuities Right For ...

  4. Introduction To Commercial Paper
    Bonds & Fixed Income

    Introduction To Commercial Paper

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center