Definition of Maturity

Maturity

For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the
date that the swap stops accruing interest.

Maturity

The date or the number of days until a security is due to be paid or
a loan is to be repaid

Maturity

The time when a policy or annuity reaches the end of its span.

Maturity

Time at which a bond can be redeemed for its face value.

Average maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates
have greater impact on funds with longer average life.

Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.

Current maturity

Current time to maturity on an outstanding debt instrument.
Current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current
assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets
and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was
acquired or the liability incurred.

Maturity factoring

Factoring arrangement that provides collection and insurance of accounts receivable.

Maturity phase

A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.

Maturity spread

The spread between any two maturity sectors of the bond market.

Maturity value

Related: par value.

Original maturity

maturity at issue. For example, a five year note has an original maturity of 5 years; one
year later it has a maturity of 4 years.

Projected maturity date

With CMOs, final payment at the end of the estimated cash flow window.

Remaining maturity

The length of time remaining until a bond's maturity.

Return-to-maturity expectations

A variant of pure expectations theory which suggests that the return that an
investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding
a zero-coupon bond with a maturity that is the same as that investment horizon.

Stated maturity

For the CMO tranche, the date the last payment would occur at zero CPR.

Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: maturity.

Time to maturity

The time remaining until a financial contract expires. Also called time until expiration.

Weighted average maturity

The WAM of a MBS is the weighted average of the remaining terms to maturity
of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance
of each of the mortgages as of the issue date.

Weighted average remaining maturity

The average remaining term of the mortgages underlying a MBS.

Yield to maturity

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.

Yield to Maturity

The measure of the average rate of return that will be earned on a
debt security held until it matures

Maturity date

The date when the issuer returns the final face value of a bond
to the buyer.

Yield to maturity

A measure of the average rate of return that will be earned
on a bond if held to maturity.

maturity premium

Extra average return from investing in longversus short-term Treasury securities.

yield to maturity

Interest rate for which the present value of the bond’s payments equals the price.

Term to Maturity

Period of time from the present to the redemption date of a bond.

Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.

Maturity Date

Date on which a debt is due for payment.

Accretion (of a discount)

In portfolio accounting, a straight-line accumulation of capital gains on discount
bond in anticipation of receipt of par at maturity.

Accrual bond

A bond on which interest accrues, but is not paid to the investor during the time of accrual.
The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.

Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.

Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.

Basis price

Price expressed in terms of yield to maturity or annual rate of return.

Benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will
demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a
comparable-maturity Treasury security that was most recently issued ("on-the-run").

Benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary
market, it's the most recently auctioned Treasury issues for each maturity.

Bond-equivalent yield

The annualized yield to maturity computed by doubling the semiannual yield.

Bootstrapping

A process of creating a theoretical spot rate curve , using one yield projection as the basis for
the yield of the next maturity.

Call date

A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
for a specified call price.

Call option

An option contract that gives its holder the right (but not the obligation) to purchase a specified
number of shares of the underlying stock at the given strike price, on or before the expiration date of the
contract.
Call premium
Premium in price above the par value of a bond or share of preferred stock that must be paid to
holders to redeem the bond or share of preferred stock before its scheduled maturity date.

Call price

The price for which a bond can be repaid before maturity under a call provision.

Call provision

An embedded option granting a bond issuer the right to buy back all or part of the issue prior
to maturity.

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.

Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.

Certificate of deposit (CD)

Also called a time deposit, this is a certificate issued by a bank or thrift that
indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest
rate, and can be issued in any denomination. The duration can be up to five years.

Commercial paper

Short-term unsecured promissory notes issued by a corporation. The maturity of
commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Discounted basis

Selling something on a discounted basis is selling below what its value will be at maturity,
so that the difference makes up all or part of the interest.

Documented discount notes

Commercial paper backed by normal bank lines plus a letter of credit from a
bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as
LOC (letter of credit) paper.

Evergreen credit

Revolving credit without maturity.

Extendable bond

Bond whose maturity can be extended at the option of the lender or issuer.

Extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and
investors.

Extension swap

Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly
longer current maturity.

Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
at a fixed price for future delivery.

GNMA Midget

A GNMA pass-through certificate backed by fixed rate mortgages with a 15 year maturity.
GNMA Midget is a dealer term and is not used by GNMA in the formal description of its programs.

Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.

Implied volatility

The expected volatility in a stock's return derived from its option price, maturity date,
exercise price, and riskless rate of return, using an option-pricing model such as Black/Scholes.

Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.

Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.

Ladder strategy

A bond portfolio strategy in which the portfolio is constructed to have approximately equal
amounts invested in every maturity within a given range.

Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.

Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.

Macaulay duration

The weighted-average term to maturity of the cash flows from the bond, where the
weights are the present value of the cash flow divided by the price.

Market segmentation theory or preferred habitat theory

A biased expectations theory that asserts that the
shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.

Match fund

A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of
the same maturity. The term is commonly used in the Euromarket.

Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

Negotiated certificate of deposit

A large-denomination CD, generally $1MM or more, that can be sold but
cannot be cashed in before maturity.

Non-parallel shift in the yield curve

A shift in the yield curve in which yields do not change by the same
number of basis points for every maturity. Related: Parallel shift in the yield curve.

On the run

The most recently issued (and, therefore, typically the most liquid) government bond in a
particular maturity range.

Optimal redemption provision

Provision of a bond indenture that governs the issuer's ability to call the
bonds for redemption prior to their scheduled maturity date.

Par value

Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.

Parallel loan

A process whereby two companies in different countries borrow each other's currency for a
specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing
foreign exchange risk. Also referred to as back-to-back loans.

Preferred habitat theory

A biased expectations theory that believes the term structure reflects the
expectation of the future path of interest rates as well as risk premium. However, the theory rejects the
assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for
and supply of funds does not match for a given maturity range, some participants will shift to maturities
showing the opposite imbalances. As long as such investors are compensated by an appropriate risk premium
whose magnitude will reflect the extent of aversion to either price or reinvestment risk.

Relative value

The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
another, or for a given instrument, of one maturity relative to another.

Reoffering yield

In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds
to investors.

Riding the yield curve

Buying long-term bonds in anticipation of capital gains as yields fall with the
declining maturity of the bonds.

Risk indexes

Categories of risk used to calculate fundamental beta, including (1) market variability, (2)
earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth orientation, and (6) financial risk.

Risk premium

The reward for holding the risky market portfolio rather than the risk-free asset. The spread
between Treasury and non-Treasury bonds of comparable maturity.

Safekeep

For a fee, bankers will hold in their vault, clip coupons on, and present for payment at maturity
bonds and money market instruments.

Savings deposits

Accounts that pay interest, typically at below-market interest rates, that do not have a
specific maturity, and that usually can be withdrawn upon demand.

Sector

Refers to a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.

Sinking fund requirement

A condition included in some corporate bond indentures that requires the issuer to
retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

Spot rate curve

The graphical depiction of the relationship between the spot rates and maturity.

Stratified sampling approach to indexing

An approach in which the index is divided into cells, each
representing a different characteristic of the index, such as duration or maturity.

Substitution swap

A swap in which a money manager exchanges one bond for another bond that is similar in
terms of coupon, maturity, and credit quality, but offers a higher yield.

Swap reversal

An interest rate swap designed to end a counterparty's role in another interest rate swap,
accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds

Tenor

maturity of a loan.

Term premiums

Excess of the yields to maturity on long-term bonds over those of short-term bonds.

Term trust

A closed-end fund that has a fixed termination or maturity date.

Terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
firm) on some specified future valuation date.

Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.

Three-phase DDM

A version of the dividend discount model which applies a different expected dividend
rate depending on a company's life-cycle phase, growth phase, transition phase, or maturity phase.

Time deposit

Interest-bearing deposit at a savings institution that has a specific maturity.
Related: certificate of deposit.

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