Financial Risk Manager

Ways of Financial and Risk Management

Financial and Business Terms - from Bog to Bon
Wednesday, May 13, 2009

Bogey: The return an investment manager is compared to for performance evaluation.
Bond: Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.
Bond agreement: A contract for privately placed debt.
Bond covenant: A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions.
Bond equivalent yield: Bond yield calculated on an annual percentage rate method. Differs from annual effective yield.
Bond indenture: The contract that sets forth the promises of a corporate bond issuer and the rights of investors.
Bond indexing: Designing a portfolio so that its performance will match the performance of some bond index.
Bond points: A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.
Bond value: With respect to convertible bonds, the value the security would have if it were not convertible apart from the conversion option.
Bond-equivalent basis: The method used for computing the bond-equivalent yield.
Bond-equivalent yield: The annualized yield to maturity computed by doubling the semiannual yield.
BONDPAR: A system that monitors and evaluates the performance of a fixed-income portfolio , as well as the individual securities held in the portfolio. BONDPAR decomposes the return into those elements beyond the manager's control--such as the interest rate environment and client-imposed duration policy constraints--and those that the management process contributes to, such as interest rate management, sector/quality allocations, and individual bond selection.
Boning: Charging a lot more for an asset than it's worth.