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.Yield curve option-pricing models Models that can incorporate different volatility assumptions along theyield curve, such as the Black-Derman-Toy model.Also called arbitrage-free option-pricing models.Yield curve strategies Positioning a portfolio to capitalize on expected changes in the shape of the Treasuryyield curve.Yield ratio The quotient of two bond yields.Yield spread strategies Strategies that involve positioning a portfolio to capitalize on expected changes inyield spreads between sectors of the bond market.Yield to call The percentage rate of a bond or note, if you were to buy and hold the security until the call date.This yield is valid only if the security is called prior to maturity.Generally bonds are callable over severalyears and normally are called at a slight premium.The calculation of yield to call is based on the coupon rate,length of time to the call and the market price. 155Dictionary of Finantial and Business TermsLico Reis Consultoria & Línguaslicoreis@terra.com.brYield to maturity The percentage rate of return paid on a bond, note or other fixed income security if youbuy and hold it to its maturity date.The calculation for YTM is based on the coupon rate, length of time tomaturity and market price.It assumes that coupon interest paid over the life of the bond will be reinvested atthe same rate.Yield to worst The bond yield computed by using the lower of either the yield to maturity or the yield to callon every possible call date.Z bond Also known as an accrual bond or accretion bond; a bond on which interest accretes interest but is notpaid currently to the i nvestor but rather is accrued, with accrual added to the principal balance of the Z andbecoming payable upon satisfaction of all prior bond classes.Z score Statistical measure that quantifies the distance (measured in standard deviations) a data point is fromthe mean of a data set.Separately, z score is the output from a credit-strength test that gauges the likelihood ofbankruptcy.Zero coupon bond Such a debt security pays an investor no interest.It is sold at a discount to its face priceand matures in one year or longer.Zero prepayment assumption The assumption of payment of scheduled principal and interest with nopayments.Zero uptick Related: tick-test rules.Zero-balance account (ZBA) A checking account in which zero balance is maintained by transfers of fundsfrom a master account in an amount only large enough to cover checks presented.Zero-beta portfolio A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.Zero-coupon bond A bond in which no periodic coupon is paid over the life of the contract.Instead, both theprincipal and the interest are paid at the maturity date.Zero-investment portfolio A portfolio of zero net value established by buying and shorting componentsecurities, usually in the context of an arbitrage strategy.Zero-one integer programming An analytical method that can be used to determine the solution to a capitalrationing problem.Zero-sum game A type of game wherein one player can gain only at the expense of another player
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