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Is the amount of interest owed by the issuer, but not yet paid to the investor (the owner of the bond), which has accumulated from the date of the last coupon payment until the sale date of the bond.

Average yield on maturity:

The average annual yield of a portfolio in the case of holding all securities until their maturity date.

Bond Classification:

Priority of covering the holders’ demands in the event of the issuing company’s liquidation.

  • Senior Debt Instruments
  • Subordinated Debt Instruments
  • Tier 2 Capital
  • Lower Tier 2 Capital
  • Upper Tier 2 Capital
  • Tier 1 Capital
  • Lower Tier 1 Capital
  • Upper Tier 1 Capital
Bond Duration:

Bond duration is a measure of the bond redemption speed and allows the comparison of bonds with the same maturity date but different methods of redemption. Duration is also useful as a risk measure as it is a mechanism to assess the sensitivity of a bond’s market value to interest rate fluctuations.

Bond Face Value:

Is the initial amount which the issuer promises to redeem (pay back) upon the maturity date of the bond.

Bond issuer:

The issuer is the financial institution (bank, company, state) which borrows capital from investors through the issuing of the bond.

Bond Price:

A bond's price is defined on the basis of one hundred (100) which corresponds to its face value. When the bond price is higher than its face value, the bond is traded at a premium. When the bond price is lower than its face value, the bond is traded at a discount. Based on the above, we distinguish the following prices:

  • Issue Price: The price at which a new bond will be issued by the issuer
  • Purchase Price: The price at which the investor buys the bond
  • Selling Price: The price at which the investor sells the bond
  • Redemption Price: The price at which the issuer repays the investor at the maturity of the bond
Bond Types:

Bonds are classified in various categories:

  • By the issuer’s type, i.e. whether the issuer is a sovereign state or private company. Thus, the bonds are distinguished between being government and corporate, municipal, supranational or international.
  • By Issuer:
    1.    Treasury bond
    2.    Corporate bond
    3.    Municipal bond
    4.    Supranational bond
  • By coupon interest they are distinguished into fixed coupons and floating rate notes.
  • By the manner the yield is collected (coupon bonds and zero coupon bonds).
  • By their maturity, there are bonds ranging from having a maturity of a few months up to perpetual bonds, in which the coupon is paid by the issuer indefinitely.

By coupon and type of payment

  1. Discount securities. Bonds traded at a discount from their face value and realize only one capital payment, upon their maturity.
  2. Treasury bill. Short term securities sold to investors at a lower price to their final face value. The issue duration may be 13, 26 or 52 weeks.
  3. Zero coupon bond. These usually have a duration from 1 to 3 years. There is an initial payment by the buyer to the issuer and a final payment to the owner of the bond.

Coupon bonds: Bonds that provide multiple periodical coupon payments prior to their maturity and one final capital payment:

  1. Fixed coupon. The most common and simple form of bond. These are mid and long-term securities. The interest rate by which each payment is calculated is fixed for the entire life of the bond, regardless of the fluctuation of the markets. The payments are regular, being every six months or per year.
  2. Floating rate note. These are bonds in which each period’s interest rate (from coupon to coupon) is readjusted based on an equity index (i.e. base rate). On this interest rate there is usually a spread representing a form of premium, depending on the issuer’s credit rating and the bond’s duration. The regularity of the payments of the floating rate notes coupons is per three months, six months or 12 months, depending on the base rate’s frequency. For example, a Greek government seven year floating rate note, bears a coupon which, for each period, equals the interest rate of the annual treasury bill applied to the coupon’s renewal date, within a given temporal margin. In European markets, the Euribor six month rate is often used as an interest rate reference. With the purchase of a floating rate note the investor ensures a long term investment with interest rates close to the current conditions of the market.
  3. Index-linked bonds. These are more specialized bond issues. They have a fixed interest rate, but in order to calculate the coupon’s value a fluctuating denominated value is taken into consideration. For this, an index is used as an adjustable basis for the implemented fixed interest rate. Such government bonds often use the inflation rate. Thus, they provide investors with protection from a rise in inflation or ensure a minimum fixed yield in case of deflation. Companies usually issue bonds linked to the stock market price index.
  4. Callable bonds & Puttable bonds. These are also specialized issues of bonds. They differ from simple bonds in that they incorporate a call premium by their issuer prior to their maturity, or sale rights from their holder to the issuer prior to their maturity, at predefined prices and dates.

A bond is a security which incorporates a promise of monetary or other provision by the issuer to the holder, particularly its bearer. This obligation usually comes in the form of capital payment upon maturity and interest payments at periods defined in the terms of the issue. Its face value, which does not necessarily coincide with the trading price, is the amount which the issuer is obliged to pay upon the bond’s maturity. Bonds may be issued by governments or corporations. In this sense bonds constitute a form of government or corporate loan.

A bond is a loan, which is drawn by the bond’s issuer not through banking mediation but through the capital markets. The issuer is the debtor, the bond owner is the creditor and the coupon (if there is one) is the interest. Bonds allow the issuer to finance long term investments with external capital. Hence the elements which give a bond its identity are: firstly, the issuer, secondly the coupon (if there is one) based on which periodical payments shall be made and thirdly the duration of the contract. Securities with a maturity of less than one year are either interest-bearing promissory notes or bills of exchange and are considered to be money market instruments.

Coupon Bond:

The periodical interest payments to the bondholder by the bond's issuer.

Coupon Frequencies:

Coupons are determined by the issuing interest rate and their payment frequency varies from issue to issue. 

Example: Coupons on government bonds are usually paid once a year, excluding US bond coupons, where payment is made twice a year.

Credit rating or investment class:

This concerns the rating of bonds based on their credit risk and which is drawn mainly from their issuer. Credit Rating Agencies assess the credit risk (risk of bankruptcy) of the bond issuers such as governments, financial institutions, corporations and the issuers of steady income securities in general.

  • Standards and Poor’s and Fitch:

Long term Rating: AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, ΒΒ+, ΒΒ, ΒΒ-, Β+, Β, Β-, CCC+, CCC, CCC-, CC, C, RD, D.
Short term Rating: F1+,F1, F1-, F2, F3,B, C, D.

  • Moody’s Investors Service:

Long term Rating: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.
Short term Rating: P-1, P-2, P-3, NP.

Current Yield:

The current yield is the annual return on a bond divided by the current market price.


This is the institution (financial institutions, banks, investment services firms etc.) which has undertaken, following a written contract, the safeguarding of a liquid asset (money or financial instruments), and is obliged to return it upon request of the entrusting party. Following an agreement, the service is charged accordingly.


When a financial fund wishes to minimize risk, the portfolio of securities they hold may consist of investment allocations across a broad spectrum of products and assets with different yields. This is part of a process called diversification and aims to reduce specific risk categories. In the frame of investment portfolio theory, investors place their wealth in diverse assets in order to maximize yield and minimize risk, or to achieve a risk-return combination appropriate for the needs of each individual investor. For example, many investors have one or more of properties, stock investments, bonds, mutual fund units, bank deposits, liquid assets etc. Whatever the mix a diversified portfolio comprises more than one asset.

Exchange Traded Funds (ETFs):

Exchange Traded Funds (ETFs) are a special category of Mutual Funds. They hold assets which mostly track a related index, such as a stock market or bond index, with an arbitraged basket of shares maintaining steady asset value. A special case of ETFs are ETCs (Exchange Traded Commodities), these are portfolios linked to commodity price indexes or specific commodities.

Expected yield:

The percentage return of an asset is the percentage rise of its price over time. For example, the return of a stock is the sum of the sale value it yields plus any rise in its price.

Issue Date:

The date on which the bond is issued.


The liquidity of an asset is defined by its easy and direct exchange with cash, goods, services or other assets. Liquidity makes transactions easier and cheaper, providing the owner of the portfolio with flexibility, because an easily liquefied asset may be converted to cash quickly should there be an immediate need for capital or should a good investment opportunity arise.

Mutual Funds:

A mutual fund is a group investment vehicle whereby securities and cash are pooled and whose individual assets belong to more than one person. The management of a mutual fund is undertaken by Mutual Fund Management Companies (MFMCs). One of the main elements of mutual fund management is the division of the wealth into equal shares. The investors who wish to place their assets in a mutual fund buy a portion of these shares. The price of the mutual fund’s shares changes on a daily basis as the capital of the mutual fund is mainly invested in financial products whose price fluctuates daily due to trading on international markets, and also due to the varying yield offered by these financial products (dividends, coupons, interests). In Greece, mutual funds fall into the following main categories:

  • Money Market Funds: Invest primarily in money market products and secondarily in steady income securities
  • Bond Funds: Invest primarily in steady income long term securities
  • Equity Funds: Invest primarily in corporate stocks
  • Mixed Funds: Invest primarily in a combination of the products from the previous categories
  • Special Purpose Funds: Invest primarily in specific sectors (e.g. technology, informatics, construction etc.)
Portfolio Credit Valuation:

The credit valuation of a portfolio is the credibility rate of a company or country regarding their ability to repay their debts, without the risk of bankruptcy.


Risk is related to the yield uncertainty of an asset or an investment. A portfolio is of high risk when there is an increased possibility that its real return differs greatly from the expected one. For example, the stock value of a newly founded internet company may be multiplied if the company succeeds, but on the other hand it could possibly become worthless to its holders.

Share Certificates:

Share Certificates are financial instruments. Share Certificates are traded values which represent the shares of a foreign company. The shares represented by these values are withdrawn from the market where the foreign company is listed, as otherwise the issuing of certificates would lead to double trading of the same shares and a lower share price. A special category of Share Certificates are American Depository Receipts (ADRs). The ADRs are certificates in writing which proves the holding of the American Depository Shares (ADSs). The latter are evidence of ownership of large corporations based outside the USA, which are traded in markets outside the USA in prices expressed in USD.


A share is a fraction of the share capital of a corporation. A share, as a security, incorporates the holder’s rights which stem from their participation in the corporation. These rights, usually, correspond to the number of shares that the holder owns. Such rights include the right to a dividend of the company’s distributed profits (if they are distributed), as well as to a respective percentage in the company’s assets, in the case of its dissolution. Shares can be ordinary, preference, registered or bearer shares; with or without voting rights; exchange traded on stock markets and multilateral trading facilities or non-exchange traded.

Stock split:

A stock split is a corporate action by which a company’s extant stocks are divided into more units, with their price being proportionally reduced so that the total value of the stocks owned by each stockholder is maintained.

A company whose stocks have good yields may decide to split their stock if the stock price is so high that it is considered too expensive for retail investors.

A company whose stocks have good yields may decide to split their stock if the stock price is so high that it is considered too expensive for retail investors.

A stock split is mainly considered to have psychological benefits as investors expect that the stock price will rise again to the levels they were at before the split, hence they will be in line to eventually benefit.

Volatility Risk:

The price of a stock or a bond, which is traded in organized markets or a Multilateral Trading Facility, undergoes unpredictable fluctuations, which are not necessarily causally connected to the financial performance of the issuing company or state. Hence there is risk of a loss of part or, under certain circumstances, the total of the invested capital. It is emphasized that it is never possible to predict the upward or downward trajectory of a stock or a bond, nor the duration of such a course. It is particularly stressed that the performance of the stock market value of a stock is the result of many factors and does not only depend on the company’s financial status as may be depicted based on the principles of fundamental analysis, for example.

Weighted Average Maturity - WAM:

This term is used to describe the average maturity of the total of a portfolio’s securities, weighted by their investment percentage.


The net yield from the bond acquisition, which is based on the market price and the interest that the investor will obtain through the bond’s coupon.

Yield to Call:

The yield of a bond from the purchase date to the call date when it can be redeemed by its issuer.

Yield to Maturity:

The yield of a bond that the investor will obtain by keeping it until its maturity. It is expressed as a percentage (%).