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Yield spread strategies |
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Definition of Yield spread strategiesYield spread strategiesstrategies that involve positioning a portfolio to capitalize on expected changes in
Related Terms:Annual percentage yield (APY)The effective, or true, annual rate of return. The APY is the rate actually Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Bond equivalent yieldBond yield calculated on an annual percentage rate method. Differs from annual Bond-equivalent yieldThe annualized yield to maturity computed by doubling the semiannual yield. Bull spreadA spread strategy in which an investor buys an out-of-the-money put option, financing it by Capital gains yieldThe price change portion of a stock's return. Convenience yieldThe extra advantage that firms derive from holding the commodity rather than the future. Coupon equivalent yieldTrue interest cost expressed on the basis of a 365-day year. Covered or hedge option strategiesstrategies that involve a position in an option as well as a position in the Credit spreadRelated:Quality spread Current yieldFor bonds or notes, the coupon rate divided by the market price of the bond. Dividend yield (Funds)Indicated yield represents return on a share of a mutual fund held over the past 12 Dividend yield (Stocks)Indicated yield represents annual dividends divided by current stock price. Earnings yieldThe ratio of earnings per share after allowing for tax and interest payments on fixed interest Effective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Effective spreadThe gross underwriting spread adjusted for the impact of the announcement of the common Equivalent bond yieldAnnual yield on a short-term, non-interest bearing security calculated so as to be Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Flattening of the yield curveA change in the yield curve where the spread between the yield on a long-term Gross spreadThe fraction of the gross proceeds of an underwritten securities offering that is paid as High-yield bondSee:junk bond. Horizontal spreadThe simultaneous purchase and sale of two options that differ only in their exercise date. Indicated yieldThe yield, based on the most recent quarterly rate times four. To determine the yield, divide Intermarket spread swapsAn exchange of one bond for another based on the manager's projection of a Intramarket sector spreadThe spread between two issues of the same maturity within a market sector. For Liability funding strategiesInvestment strategies that select assets so that cash flows will equal or exceed Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co. Maturity spreadThe spread between any two maturity sectors of the bond market. Naked option strategiesAn unhedged strategy making exclusive use of one of the following: Long call Non-parallel shift in the yield curveA shift in the yield curve in which yields do not change by the same Option-adjusted spread (OAS)1) The spread over an issuer's spot rate curve, developed as a measure of Parallel shift in the yield curveA shift in the yield curve in which the change in the yield on all maturities is Pure yield pickup swapMoving to higher yield bonds. Quality spreadAlso called credit spread, the spread between Treasury securities and non-Treasury securities Realized compound yieldyield assuming that coupon payments are invested at the going market interest Relative yield spreadThe ratio of the yield spread to the yield level. Reoffering yieldIn a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds Required yieldGenerally referring to bonds, the yield required by the marketplace to match available returns Riding the yield curveBuying long-term bonds in anticipation of capital gains as yields fall with the Spread1) The gap between bid and ask prices of a stock or other security. Spread incomeAlso called margin income, the difference between income and cost. For a depository Spread strategyA strategy that involves a position in one or more options so that the cost of buying an SpreadsheetA computer program that organizes numerical data into rows and columns on a terminal screen, Steepening of the yield curveA change in the yield curve where the spread between the yield on a long-term TED spreadDifference between U.S. Treasury bill rate and eurodollar rate; used by some traders as a Vertical spreadSimultaneous purchase and sale of two options that differ only in their exercise price. See: Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. YieldThe percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest Yield curveThe graphical depiction of the relationship between the yield on bonds of the same credit quality Yield curve option-pricing modelsModels that can incorporate different volatility assumptions along the Yield curve strategiesPositioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve. Yield ratioThe quotient of two bond yields. Yield to callThe percentage rate of a bond or note, if you were to buy and hold the security until the call date. Yield to maturityThe percentage rate of return paid on a bond, note or other fixed income security if you Yield to worstThe bond yield computed by using the lower of either the yield to maturity or the yield to call dividend yield ratioCash dividends paid by a business over the most Bond Equivalent YieldBond yield calculated on an annual percentage rate method Effective Annual YieldAnnualized rate of return on a security computed using compound Yield CurveA graphical representation of the level of interest rates for Yield to MaturityThe measure of the average rate of return that will be earned on a labor yield variance(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate); material yield variance(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price); process quality yieldthe proportion of good units that resulted from the activities expended yieldthe quantity of output that results from a specified input yield ratiothe expected or actual relationship between input and output Par yield curveThe yield curve of bonds selling at par, or face, value. Spot curve, spot yield curveSee Zero curve. SpreadFor options, a combination of call or put options on the same stock Yield a. Measure of return on an investment, stated as a percentage of price. Yield curveGraph of yields (vertical axis) of a particular type of security Yield to maturityA measure of the average rate of return that will be earned Zero curve, zero-coupon yield curveA yield curve for zero-coupon bonds; Production yield varianceThe difference between the actual and budgeted proportions current yieldAnnual coupon payments divided by bond price. spreadDifference between public offer price and price paid by underwriter. yield curveGraph of the relationship between time to maturity and yield to maturity. yield to maturityInterest rate for which the present value of the bondâ€™s payments equals the price. Current YieldThe percentage return on a financial asset based on the current price of the asset, without reference to any expected change in the price of the asset. This contrasts with yield-to-maturity, for which the calculation includes expected price changes. See also yield. YieldThe interest rate that makes the present value of a stream of future payments associated with an asset equal to the current price of that asset. Also called yield to maturity. See also current yield. Yield curveA graph showing how the yield on bonds varies with time to maturity. SpreadThe difference between items typically between two rates of interest or currencies.
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