Zero coupon

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.)

See also

• Reinvestment risk
• Zero coupon bond
• Zero-coupon swap