IFMP Fixed Income Securities Certification (FISC), Pakistan key terms

A financial instrument that pays the holder a defined stream of periodic income, usually interest, and returns principal at maturity. Bonds, sukuk and treasury bills are common examples.

A tradable debt obligation in which the issuer borrows a fixed principal from investors and promises scheduled interest payments plus repayment of that principal on a stated future date.

The entity that borrows money by selling a fixed income security and is legally obliged to make the promised interest and principal payments to holders.

The amount borrowed and stated on the bond, on which interest is calculated and which the issuer repays at maturity. Also called par value or nominal value.

The annual interest rate stated on a bond, expressed as a percentage of face value, which determines the cash amount paid to holders each coupon period.

The actual cash interest amount paid to a bondholder for a period, usually calculated as the coupon rate multiplied by face value, divided by the number of payments per year.

The date on which a fixed income security's principal becomes due and the issuer must repay the outstanding face value to holders, ending the security's life.

The remaining time, usually measured in years, until a bond's principal is repaid. It is a key input to duration and to assessing interest rate sensitivity.

A bond that pays no periodic interest. It is sold at a discount to face value, and the investor's return comes from the difference between purchase price and repayment at maturity.

A bond whose coupon rate stays constant for the life of the security, so the cash interest payments do not change even when market interest rates move.

A bond whose coupon resets periodically according to a reference benchmark plus a stated spread, so interest payments rise and fall with market rates.

The published benchmark, such as a policy rate or interbank offered rate, to which a floating rate note's coupon is linked when it resets each period.

The additional yield, expressed in basis points, that an issuer pays over a reference benchmark or that a bond yields over a comparable risk-free security.

A unit equal to one hundredth of one percentage point (0.01%). Market participants quote yield changes, spreads and coupon margins in basis points for precision.

The quoted price of a bond excluding accrued interest since the last coupon date. Settlement amount equals clean price plus accrued interest.

The total price a buyer actually pays for a bond, equal to the clean price plus accrued interest owed to the seller for the part of the coupon period already elapsed.

Interest that has built up on a bond since its last coupon payment but has not yet been paid. The buyer compensates the seller for this amount at settlement.

The single annualised discount rate that equates all future coupon and principal cash flows of a bond to its current market price, assuming the bond is held to maturity.

A simple income measure equal to the bond's annual coupon payment divided by its current market price, ignoring any capital gain or loss to maturity.

A bond trading below its face value, which happens when its coupon is lower than prevailing market yields. The shortfall to par adds to the investor's return.

A bond trading above its face value, typically because its coupon rate exceeds current market yields. The investor faces a capital loss if held to maturity.

A weighted average measure of how long an investor waits for a bond's cash flows. It also estimates the percentage price change for a small change in yield.

A duration measure adjusted for compounding frequency that estimates the percentage change in a bond's price for a one percentage point change in yield.

A measure of how a bond's duration itself changes as yields move, capturing the curvature of the price-yield relationship and improving price estimates for larger yield shifts.

The risk that a bond's price falls when market interest rates rise. Longer maturity and lower coupons generally make a bond more sensitive to rate changes.

The risk that an issuer fails to pay interest or principal on time, or that its perceived ability to pay deteriorates, reducing the bond's market value.

The specific chance that an issuer will miss a scheduled interest or principal payment, triggering restructuring or bankruptcy proceedings for the security.

An independent agency's opinion, expressed on a letter scale, of an issuer's or issue's ability and willingness to meet debt obligations on time.

A credit rating band, typically from AAA down to BBB-, indicating relatively low default risk and often required by institutional mandates and prudential regulations.

A bond rated below investment grade, offering a higher coupon to compensate investors for greater default risk and typically greater price volatility.

The yield difference between a corporate or sovereign bond and a comparable risk-free benchmark, reflecting the market's view of default and liquidity risk.

The risk that a bond cannot be sold quickly at a fair price because few buyers are active, forcing the seller to accept a discount or delay the trade.

The gap between the highest price a buyer will pay and the lowest price a seller will accept. Wider spreads indicate thinner liquidity and higher trading costs.

A graph plotting yields of similar bonds against their terms to maturity, showing whether short or long maturities offer higher yields at a given time.

A yield curve shape where short-term yields exceed long-term yields, often interpreted by markets as a signal of expected rate cuts or slowing economic growth.

A bond feature allowing the issuer to redeem the security before maturity at a specified price, usually when rates have fallen and refinancing is cheaper.

The risk that cash received from coupons or a called or matured bond must be reinvested at lower prevailing yields, reducing the investor's realised long-term return.

A sharia-compliant certificate representing ownership in an underlying asset, project or venture, paying returns from that asset rather than conventional interest.

A short-term government security sold at a discount to face value with a maturity of up to one year, used to manage liquidity and fund short-term public needs.