Bond terminology...

The great dream of XML is interchangable data formats that are readily understood. But the sheer number of terms, special cases, fields, fields used different ways by different people, etc, etc, etc in the bond markets make the data structure quickly impenetrable.

Consider. Money starts as interest on a loan, turns into the loan's coupon, and then morphs into the wac (weighted average coupon) over the bond. And that is just one field. Every field is like that. It only gets worse when the field is, say, a status code and one vendor is unreliable about populating it while another is very reliable but invents new status codes. And you are supposed to show this to people?

BTW what is scary is what I have picked up through osmosis. For instance your title makes perfect sense to me. A certificate of deposit is something you can put your money into for a fixed time at a guaranteed interest rate. A call on a financial instrument means that someone else has the right to buy it from you at any time under some negotiated rate. A callable CD is therefore a CD which someone (usually the issuer) can buy back at any time.

So I would guess that you were hearing about callable CDs, how to price them (price the bond and then the call, pricing the call requires Black-Scholes), and possibly you talked some about what the call does to the hedging characteristics of the bond. Stuff that you need to know because your software is going to be used to make buy and sell decisions...

Cheers,
Ben

Post #10,763 by admin 9/28/01 9:02:07 AM Reply	Bond terminology... Yes, that part is a bit overwhelming at times. They have a running weekly bond seminar here in the conference room, however, which helps. And a sense of humor: the announcement yesterday went something like: "Attention, K-Mart shoppers! For your listening pleasure, Tom will be conducting this week's Bonds 101 at 2PM on the wild and fabulous subject of Callable Certificate of Deposit Issues!" Regards, -scott anderson
Post #10,860 by ben_tilly 9/28/01 9:27:29 PM Reply	Bonds show the problem of XML The great dream of XML is interchangable data formats that are readily understood. But the sheer number of terms, special cases, fields, fields used different ways by different people, etc, etc, etc in the bond markets make the data structure quickly impenetrable. Consider. Money starts as interest on a loan, turns into the loan's coupon, and then morphs into the wac (weighted average coupon) over the bond. And that is just one field. Every field is like that. It only gets worse when the field is, say, a status code and one vendor is unreliable about populating it while another is very reliable but invents new status codes. And you are supposed to show this to people? BTW what is scary is what I have picked up through osmosis. For instance your title makes perfect sense to me. A certificate of deposit is something you can put your money into for a fixed time at a guaranteed interest rate. A call on a financial instrument means that someone else has the right to buy it from you at any time under some negotiated rate. A callable CD is therefore a CD which someone (usually the issuer) can buy back at any time. So I would guess that you were hearing about callable CDs, how to price them (price the bond and then the call, pricing the call requires Black-Scholes), and possibly you talked some about what the call does to the hedging characteristics of the bond. Stuff that you need to know because your software is going to be used to make buy and sell decisions... Cheers, Ben
Post #10,905 by wharris2 9/29/01 10:52:08 AM Reply	Amen. XML as pipe dream Who knows how empty the sky is In the place of a fallen tower. Who knows how quiet it is in the home Where a son has not returned. -- Anna Akhmatova (1889-1966)

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