Financial Dictionary

The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date.

Mainly applies to convertible securities. Effective yield of usable converbile bonds determined by the expiration date of the applicable warrants.

Mainly applies to convertible securities. Effective yield of usable or synthetic convertible bonds determined against the first date at which the warrants can be called.

The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price.  It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.

The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

Strategies that involve positioning a portfolio to capitalize on expected changes in yield spreads between sectors of the bond market

The quotient of two bond yields.

Mainly applies to convertible securities. Graph showing the term structure of interest rates by plotting the yield of all bonds of the same quality with maturities ranging from the shortest to the longest available.

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.