Chapter 2: Key Features of Fixed-Income Securities

In this section

• Bond Indentures and Covenants (Affirmative vs. Negative)
  Explore the fundamentals of bond indentures, how affirmative and negative covenants protect investors, and real-world examples of covenant enforcement in fixed-income markets.
• Principal Amount, Coupon Structure, and Maturity
  [Explore how a bond’s principal amount, coupon structure, and maturity define its cash flows, risk profile, and valuation fundamentals in fixed-income markets.]
• Embedded Options and Contingency Provisions
  Discover how embedded options and contingency provisions in fixed-income securities shape bond pricing, yield, and risk profile, including detailed perspectives on valuation models, accounting standards, and practical exam strategies.
• Legal, Regulatory, and Tax Considerations
  Explore the legal frameworks, regulatory oversight, and tax implications crucial to understanding fixed-income investing, with real-world examples and best practices for CFA Level I candidates.
• Bonds with ESG Features (Green, Social, and Sustainability-Linked)
  Explore green bonds, social bonds, and sustainability-linked bonds—how they work, how they're structured, and how investors integrate ESG impact and returns.
• Sukuk and Other Sharia-Compliant Structures
  Explore key concepts of Sukuk, Ijarah, Murabaha, and other Sharia-compliant structures, highlighting how Islamic finance principles shape fixed-income instruments and their role in global markets.
• Stripped Securities and Zero-Coupon Bonds
  Explore the mechanics and benefits of stripped securities and zero-coupon bonds, including creation, valuation, yield considerations, tax issues, and portfolio applications.
• Variable-Rate and Perpetual Bonds
  Dive deep into the mechanics, risks, and valuation of floating-rate and perpetual bonds, exploring how these securities function in today's fixed-income markets.
• Dual-Currency and Multicurrency Bond Structures
  Explore how dual-currency and multicurrency bond structures offer coupon payments and principal in multiple currencies, the associated risks, hedging techniques, and practical examples for advanced fixed-income portfolio management.
• Panda, Samurai, Masala, and Other Local Currency Bond Types
  Dig into the world of local currency bonds—Panda, Samurai, Masala, and more—to understand issuance mechanics, regulations, and unique risk-return profiles for CFA Level I exam success.
• Payment-in-Kind (PIK) and Toggle Bonds
  Explore how Payment-in-Kind and Toggle Bonds function, their structural features, and key risks within the fixed-income space.
• Negative Coupon Bonds and Zero-Floor Provisions
  Explore how and why bonds can carry negative coupons in distorted interest rate environments and see how zero-floor provisions protect investors from paying interest to issuers.
• IFRS vs. US GAAP for Bond Classifications and Disclosures
  Discover how IFRS and US GAAP differ in classifying, measuring, and disclosing bonds. Learn about amortized cost, fair value treatments, and real-world examples for effective analysis.
• Real-World ESG Bond Issuances and Regulatory Frameworks
  A comprehensive look at the rising prominence of ESG bond issuances, covering frameworks such as SFDR and the European Green Bond Standard, real-life issuance examples, and best practices for analyzing sustainability claims.
• The Role of Guarantors and Bond Insurance in Security Features
  Learn how bond insurers and guarantors enhance credit quality, their structure in fixed-income markets, and practical insights for advanced financial professionals.
• Greenwashing Risks and Mitigation in ESG Bond Markets
  Explore the nature of greenwashing in ESG bond issuance, the associated risks, and key strategies for mitigating these challenges in sustainable finance.