1.Guadagnare the Notes
investing in bonds, making a sort of loan to a company, every year or every six months, the company will return the interest earned by coupons at the end of the predetermined period the issuing company will refund the entire capital the creditor and will end the relationship.
Other earning through the collection of coupons (interest income ) there is the potential to earn by selling the bond before its maturity. The sales transaction does not guarantee that the sale price is equivalent to the amount invested, the sale is profitable only if in the meantime, the bond price has risen. If, however, in the intervening period between the purchase and sale, the bond price falls there will be a loss.
2-Types of bonds
There are several types of bonds, each of which has distinctive features in their own right and which is of course good to know before making any investment.
First, the bonds can be categorized by body issuer, such as may be issued by the state, by companies or private companies, or supranational bodies;
The bonds are the most popular bonds formed by : Bot , CCT Btp , through which the state obtains cash from the citizens, but can also be issued by companies or supranational entities, the bonds issued by companies defined corporate bonds or corporate bonds, while those issued by supranational bodies called supranational bonds or sovereign.
The bonds are then classified according to the procedures for reimbursement , it can be expected coupon payments at fixed or variable, or zero coupon bonds (also known as zero coupon bonds). An additional variable of the bonds lies in the timing of reimbursement , which may be semi-annually or annually, etc..
-Corporate Bonds:
corporate bonds, corporate bonds are securities issued by private companies, but also by banks, which are designed to obtain liquidity for their activities. Currently in the Italian market, most corporate bonds are issued by lenders.
-Convertible bonds:
are bonds that have the capacity to convert the bond into shares at a specified date according to a predetermined exchange ratio. They bond the group of structured bonds are a form of investment hybrid between bonds and equities. Even in convertible bond holder receives the interest of better defined (coupon) maturing annual general meeting as a normal bond, but the investor will offer further possibilities, or to convert their bonds into shares . The rules and timing are predetermined course at the time of subscription of securities.
Convertible bonds are securities that allow investors then become a shareholder of the company and offered them a loan following the conversion ratio that specifies all the terms of the transaction. In addition, the convertible bonds may direct conversion and indirect conversion when the conversion is taking possession of securities of a company other than that with which we signed the contract bond.
-bonds with warrants :
in this type of bonds the investor buying the bonds receives the right to purchase additional licenses on favorable terms. The warrants can have a life separate from bonds, so the right holder is entitled to exercise it or sell it under the conditions of issue.
fixed-rate bonds:
in this case the investor is entitled to a return to a fixed interest rate fixed before the release.
variable-rate bonds:
In variable-rate bonds will have a premium calculated with variable interest rate below market rates. These bonds are characterized by a duration equal to zero.
-Zero-Coupon Bonds:
Zero-Coupon Bonds or ZCB securities are zero coupon , in this case there are no periodic payments, using coupons, but the interest is returned to the capital at the end of the title. In this case, duration is equal to the time remaining life of the title. The bond yield is calculated by subtracting the purchase price the final price . The absence of the coupon indicates the absence of periodic payments of interest, because the only revenue comes from the difference between purchase price and the amount of money returned. Typically, zero coupon securities have short duration, less than a year.
investments in zero coupon bonds at a discount occur, the gain of the investment is determined by the difference between the redemption value and purchase price ( debt or issue price). For example, if you buy a zero coupon bond maturing in one year at a price of 97 when we will be reimbursed for a value of 100 will have a gain of 3%. Among the zero-coupon bonds are the most common bots.
-Indexed bonds:
indexed bonds are securities characterized by variable interests closely related to the performance of certain financial values \u200b\u200bthat may be real, monetary or exchange rate, as specified for the issuance of bonds.
-Structured bonds:
The structured notes are characterized by a return linked to indexes of one or more financial instruments.
-step-down Notes:
are fixed rate, but the peculiarity of these titles lies in the gradual change in the coupon that is subjected to a predetermined level of reduction during the entire period of the notes. Eg. If we subscribe to a bond step-down period of 5 years we could have a starting rate of the first coupon of 6% and may weigh up each successive reduction in the rate equal to 0.30%, so the following year with annual coupons we would have a yield of 5.70%, the third year of 5.40%, and thus proceeding until the expiry of the license.
bonds with step-down in the first practice we would have coupons with a value higher than the later, the coupons are paid semi-annually or annually, the maturity of the securities will be refunded the full value of bonds held.
-step-up Notes:
As bonds step down bonds also step up include a change in the value of the coupon during life of the bond. However, contrary to the obligations step down, step up is expected in a increase the coupon on the basis of a predetermined plan at the time of issue. The coupons thus assume a progressively higher value. Even here the coupons are payable semi-annually or annually and at maturity the bond will be paid a refund equal to the value of bonds held.
-reverse convertible bonds:
are special bonds where the issuer has the right to give the person who owns the bonds in lieu equity capital corresponding to value of bonds, but this can only happen if there are special conditions thereof and signed at the time of purchase. Bonds reverse convertibles pay a fixed interest rate generally higher than the ordinary fixed-rate bonds, but the holder of the securities has no guarantee that the company fully repaid the loan at maturity. The return on investment is tied to the performance of a stock, only if the share at maturity is greater than a predetermined value, the investor will receive back the full amount of capital invested. The reference price is defined strike price, in the case rather than upon the expiry of the share value does not exceed the strike price the holder of the securities will be paid a certain amount of shares whose value is much lower than the original amount invested in bonds. Reverse convertible bonds with the holder of the securities does not have the certainty of repayment of capital, but if at the expiry of the benchmark index is above the strike price then it will return the full amount and will have received coupon payments resulting from the substantial high interest rates.
-Bonds drop lock:
are variable-rate bonds, but bring with them a special warranty clause that protects the holder of bonds drop lock when rates interest falls below a preset value. At the time of a value is established in the interest rate defined: trigger rate, if rates were to fall below the trigger rate lock drop the debt becomes a fixed rate bond usually until the end of the title. They are a form of investment which reduces the risk in the event of any cuts in interest rates.
-Bonds fixed reverse floater:
bonds are in the category of structured bonds with a relatively long duration, at first behave like fixed-rate bonds , and may take the configuration of bonds step down, with traditional coupons to decreasing amount, to change it later indexed bonds in , this behavior is precisely defined "reverse" . How indexed bonds possess a return linked to the performance of specific indexes determined at issuance of fixed rate then pass a variable rate . Each fixed obligation reverse floater has certain characteristics and methods of operation and conversion, all parameters to understand fully before a 'possible subscription.
-index-linked bonds:
structured bonds are characterized by a return correlated to the performance of equity indices or equities in the case of equity linked .
3.I risks of investing in bonds
The first risk is called risk default, which is the risk that the company issuing the bond did not result in the ability to pay interest . There is a rating system that assigns to each issuing company a degree of risk, better known as as rating (which we will see later). Companies with a low rating will issue bonds with a higher level of risk than higher rated companies, which have a greater confidence .
the rating level is also associated with the profitability of the title, in fact, bonds ratings are associated with different levels of risk different , low-rated companies will issue bonds with a higher level of risk, and therefore with a greater tendency to offer earn more than bonds issued by rated companies higher.
An additional risk of investing in bonds comes from the so-called price risk, in fact the price of a bond may vary over time, in the case of fixed rate bonds the price is subject to major changes with respect to a 'debt with variable interest rates.
For example, if rates market increases the prices of fixed rate bonds already issued are decreasing, while if market rates fall, bond prices being increased. The variation in price depends on another parameter of the bonds, the duration ; the term duration is defined as the duration of the license . bonds with high duration have a 'high sensitivity in price changes in response to fluctuations in interest rates.
For example, if rates market increases the prices of fixed rate bonds already issued are decreasing, while if market rates fall, bond prices being increased. The variation in price depends on another parameter of the bonds, the duration ; the term duration is defined as the duration of the license . bonds with high duration have a 'high sensitivity in price changes in response to fluctuations in interest rates.
At the time of sale you may experience an additional risk, if a bond has little liquidity and therefore little demand from the market, its price is bound to get affected negatively.
Another risk is related to the currency of issue obligation, if in fact the bond is issued in dollars or another foreign currency, at the time of the change in the value of the euro exchange rate can lead to a reduction of its value.
4.Il bond ratings
E ' a assessment of quality of the title, carried out by specialized agencies, and is basically an estimate of the risk of credit of an issuer obligations and its ability to meet its commitments payment (coupon payment) resulting from the issuance of bonds.
The risk assessment is divided into rating of the issuer that corresponds to a global and comprehensive assessment of a particular issuer rating and that instead of issuing the currency issuer's ability to repay the capital and interest at a specified time.
The rating is a tool to express a ranking of the quality of the issuers a bond using criteria that take into account financial soundness of the issuer's potential through timely analysis of financial condition of the company (financially) by analysis of the sector they belong and their position in the industry.
bonds characterized by AAA pronounce the highest level of reliability of the issuer, while a value of type D corporate bankruptcy indicates situations.
The rating therefore takes a very important role for the investor who can use it as a tool for risk assessment connected to a particular investment , in practice the increase of the growing confidence rating to the issuer and then decreases the interest rate bonds.
The rating of the issuers of the bonds is provided by specialized agencies that perform complex analysis on the ongoing health of their companies and financial framework. The agencies are the most popular Moody's and Standard & Poor's . The rating is an important tool for decision to the investor, although it must not be the only benchmark for the decision remains a valid indicator of the risk of a issuer.
5.Valore bond
The nominal value of bonds : represents the portion of the debt on which they are shown on the obligation and the interest calculated .
The issue price of bonds : is the amount the bondholder agrees to pay at the time of subscription obligation. The issue price may be higher, at or below face value, these differences are related to the interest rate applied, the guarantees offered, the market conditions, competition and other variables.
current price of bonds: the price is reported at a given time in a given market.
Redemption price of bonds: is the amount paid by the Company for the extinction of the obligation, generally coincides with the nominal value, but may be even higher if it includes a redemption premium.
I bonds are extinguished by repaying the following methods of depreciation plan, there may be other modes of extinction: purchase of bonds on the market and then cancel them, if any, or the 'option' you can have the conversion of bonds into shares.
GOOD TRADING ...
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