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Finance GlossaryGovernment Bonds
Government Bonds
Definition of Government Bonds
Government bonds are debt instruments that allow the central banks to raise capital to finance operations. The types of government bonds are:
- Treasury Bills
- Fixed Rate Bonds
- Floating Rate Bonds
- State Development Loans
- Sovereign Gold Bonds
- Zero Coupon Bonds
Every government bond has a credit rating that’s based on the financial health of the country. The government is the apex institution of any country, which is why their credit rating is the high.
In India, you’ll notice government bonds with the credit rating SOV. This is known as a sovereign rating.
In India, you’ll notice government bonds with the credit rating SOV. This is known as a sovereign rating.
Related Terms
Hard Underwriting
A hard underwriting occurs when the underwriter agrees to buy their share of stock before the IPO opens. This is known as hard underwriting because in a regular underwriting process, the underwriter is liable to buy all unsold shares after the issue opens.
Gold ETF
A gold ETF is an exchange-traded fund that invests in gold bullion. Every unit of a gold ETF is backed by one gram of gold of assured purity that is held in the physical or demat form (digital).
Gold ETFs combine the lucrative value of gold with the liquidity of stocks. Thus, gold ETFs track the price of gold bullion and are traded on stock exchanges like NSE and BSE.
Gold ETFs combine the lucrative value of gold with the liquidity of stocks. Thus, gold ETFs track the price of gold bullion and are traded on stock exchanges like NSE and BSE.
Call Option
A call option is a type of derivative contract that gives the right but not the obligation to buy an underlying asset like shares, commodities, currencies, and others at a pre-agreed price and date.
There are three components to a call option:
There are three components to a call option:
- Premium: the price paid to buy a call option
- Strike price: the pre-agreed price of the underlying asset
- Expiration date: the day after which the option contract will be worthless
Cheapest To Deliver
Cheapest to deliver (CTD) refers to the cheapest or lowest priced security in a futures contract that a seller can deliver to a buyer who holds a long position.
Here’s the formula to calculate the cheapest security that can be delivered:
- Short position: Current price of security + accrued interest
- Long position: Settlement price x conversion factor + accrued interest
Put Option
A put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying security (like a stock) at a predetermined price (the strike price) on or before a specified date (the expiration date). Buyers of put options typically expect the price of the underlying asset to decline. Put options are used for speculation or for hedging a long position in the underlying asset.
Shares Outstanding
Shares outstanding is the overall number of shares of a company that investors are currently holding. These shares are presently held by promoters, institutions, and the public. The number of shares outstanding is used to calculate important metrics like market capitalisation and earnings per share. When there’s a change in this number, it can impact the prices of stocks and investor valuations.
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