something that does not really exist: • does not exist on paper (stocks, debt) - e.g. Russian trading started with electronic systems from the very beginning, while older systems - in Europe and in the US - may still physically move papers (obligations) from one shelf in Depositary to another) • does not exist as a share of a company - just an obligation (debt) • does not represent an asset, but is dependent on the price of the underlying asset
to pay the lender the interest (“Coupons”) on the borrowed amount (“Principal” or “Notional”, or sometimes “Face Amount”) during the term of the bond, and repay the Principal at maturity (also known as “Redemption Date”). Fixed-coupon bond, floating-rate bond, zero-coupon bond (discounted bond) Callable, puttable and... convertible!
interest payments vs. floating rate interest payments, at predefined times in the future, until maturity Basis Swap – 3MEURIBOR interest payments vs. 1YEURIBOR interest payments, at predefined times in the future, until maturity Currency Swap – interest payments in one currency are exchanged to interest payments in another currency, Notional Amounts are exchanged at the end of the swap.