Zero coupon: Difference between revisions
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Zero coupon instruments pay only a single amount at their final maturity. They do not pay any intermediate interest. | Zero coupon instruments pay only a single amount at their final maturity. They do not pay any intermediate interest. | ||
Investors in zero coupon instruments are not exposed to reinvestment risk, because the whole of their return is enjoyed via the capital gain up to maturity, which is fixed from the investment date. (So long as they hold their investment for its full life up to final maturity.) | |||
Investors in zero coupon instruments are not exposed to reinvestment risk, because the whole of their return is enjoyed via the capital gain up to maturity, which is fixed from the investment date. | |||
(So long as they hold their investment for its full life, up to its final maturity.) | |||
== See also == | == See also == | ||
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* [[Zero coupon bond]] | * [[Zero coupon bond]] | ||
* [[Zero-coupon swap]] | * [[Zero-coupon swap]] | ||
Revision as of 11:19, 13 July 2013
Zero coupon instruments pay only a single amount at their final maturity. They do not pay any intermediate interest.
Investors in zero coupon instruments are not exposed to reinvestment risk, because the whole of their return is enjoyed via the capital gain up to maturity, which is fixed from the investment date.
(So long as they hold their investment for its full life, up to its final maturity.)
