Advanced Bond Concepts
  1. Advanced Bond Concepts: Introduction
  2. Advanced Bond Concepts: Bond Type Specifics
  3. Advanced Bond Concepts: Bond Pricing
  4. Advanced Bond Concepts: Yield and Bond Price
  5. Advanced Bond Concepts: Term Structure of Interest Rates
  6. Advanced Bond Concepts: Duration
  7. Advanced Bond Concepts: Convexity
  8. Advanced Bond Concepts: Formula Cheat Sheet
  9. Advanced Bond Concepts: Conclusion

Advanced Bond Concepts: Introduction

By root

In their simplest form, bonds are pretty straightforward. After all, just about anyone can comprehend the borrowing and lending of money. However, like many securities, trading and analyzing bonds involves some more complicated underlying concepts.

The goal of this tutorial is to explain the more complex aspects of fixed-income securities. We'll reinforce and review bond fundamentals such as pricing and yield, explore the term structure of interest rates, and delve into the topics of duration and convexity. (Note: Although technically a bond is a fixed-income security with a maturity of ten years or more, in this tutorial we use the terms "bond" and "fixed-income security" interchangeably.)

The information and explanations in this tutorial assume that you have a basic understanding of fixed-income securities.

(If you feel you need a refresher, please see Bond Basics.)


Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Advanced Bond Concepts: Bond Type Specifics

  1. Advanced Bond Concepts: Introduction
  2. Advanced Bond Concepts: Bond Type Specifics
  3. Advanced Bond Concepts: Bond Pricing
  4. Advanced Bond Concepts: Yield and Bond Price
  5. Advanced Bond Concepts: Term Structure of Interest Rates
  6. Advanced Bond Concepts: Duration
  7. Advanced Bond Concepts: Convexity
  8. Advanced Bond Concepts: Formula Cheat Sheet
  9. Advanced Bond Concepts: Conclusion
RELATED TERMS
  1. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  2. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  3. Dollar Duration

    Dollar duration measures the dollar change in a bond's value ...
  4. Bond

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RELATED FAQS
  1. How does duration impact bond funds?

    Learn how duration for a bond fund measures the risk the bond portfolio has to a rise in interest rates, and see how managers ... Read Answer >>
  2. How can I use a bond's duration to predict its return?

    Learn how the concept of duration is used to determine when future cash flows for a bond will equal the amount paid for the ... Read Answer >>
  3. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ... Read Answer >>
  4. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
  5. How do I use the principles of convexity to compare bonds?

    Read a brief overview of bond duration and bond convexity and why bondholders should take these into consideration when deciding ... Read Answer >>
  6. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>

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