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. Bonds & Fixed Income

    Advanced Bond Concepts

  2. Retirement

    Bond Basics Tutorial

  3. Bonds & Fixed Income

    What determines the price of a bond ...

  4. Bonds & Fixed Income

    How long will it take for a bond to ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center