This is a
discount bond issued for less than its par value.
However, at maturity T, the price of the
discount bond D(T, T) [equivalent to] 1 and the price of the contingent claim are given by the payoff V(T, [X.sub.T]) = [psi]([X.sub.T]).
investors, by comparison, received a
discount bond reflecting a 66.3%
8 August 2011 - The Romanian arm of Turkish finance group Garanti (IST:GARAN) has issued a EUR40m (USD56.7m)
discount bond in Turkey, the lender said today.
It is worth noting that, under current rules, the holder of a market
discount bond does not have to annually include in gross income the accrued market discount.
However, the market
discount bond rules supersede this general principle.
Not surprisingly, discussions of the terms of the
discount bond (a bond issued at less than the principal amount of the debt exchanged) focused on the appropriate percentage of the principal discount and the interest spread; and discussions of the par bond (a bond issued at the same principal amount as the debt exchanged) focused on the applicable initial interest rate and the later step-up of the interest rate.
One-period nominal forward contracts, s periods ahead; these contracts represent a commitment in period t to purchase a one-period nominal
discount bond in period t + s at the pre-specified dollar price [Q.sub.t,s.sup.f].
For a
discount bond, the basis increases at the rate of the accrued market discount until it reaches the principal value at maturity.