What Is a Bond Option? A bond option is an option contract in which the underlying asset is a bond. Like all standard option contracts, an investor can take many speculative positions through either bond call or bond put options. In general, all types of options, including bond options, are derivative products that allow investors
What is Bond Power? Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to another, without endorsing the actual bond certificate. Key Takeaways Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to
What Is a Bond Quote? A bond quote is the last price at which a bond traded, expressed as a percentage of par value and converted to a point scale. Par value is generally set at 100, representing 100% of a bond’s face value of $1,000. For example, if a corporate bond is quoted at
What is a Bond Rating? A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s Investors Service, and
What Are Bond Rating Agencies? Bond rating agencies are companies that assess the creditworthiness of both debt securities and their issuers. These agencies publish the ratings used by investment professionals to determine the likelihood that the debt will be repaid. Key Takeaways Bond rating agencies are companies that assess the creditworthiness of both debt securities
What Is the Bond Ratio? The bond ratio is a financial ratio that expresses the leverage of a bond issuer by examining the value of bonds outstanding and when they come due. Leverage refers to any borrowed capital, such as debt issued in the form of bonds or other debts. Key Takeaways The bond ratio
What Is a Bond Resolution? A bond resolution is a document where the issuer authorizes a bond’s issuance and sale, along with defining the rights of the respective parties to the bond contract, namely the issuer and the bondholder. Key Takeaways A bond resolution is a document that details and authorizes the issuance of bonds
What Is a Bond Swap? A bond swap consists of selling one debt instrument and using the proceeds to buy another debt instrument. Investors engage in bond swapping with the goal of improving their financial positions within a fixed-income portfolio. For example, bond swapping can reduce an investor’s tax liability, give an investor a higher
What Is a Bond Trustee? A bond trustee is a financial institution that is granted trust powers, such as a commercial bank or trust company. This entity, in turn, has a fiduciary duty to the bond issuer to enforce the terms of a bond indenture. A trustee sees that bond interest payments and principal repayments
What is a Bond Violation A bond violation is a breach of the covenants of a bond. A bond covenant is a legally binding term of the agreement between a bond issuer and a bondholder. Bond covenants are designed to protect the interests of both parties. The inclusion of the covenant is in the bond’s indenture
