Cushion bonds

Definition:

High-coupon bonds trading at a premium that tend to fall in price much less than comparable bonds when interest rates rise (hence the cushion effect), because of their high coupons.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Bundling, unbundling

Creation of securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes.

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