CFA L1 / FI / M1. Instrument Features
Module 1 · Fixed Income

Fixed-Income Instrument Features

EN: Bond basics — issuer, maturity, coupon, principal, indenture, embedded options.
VN: Đặc điểm cơ bản trái phiếu.

1. Bond Basic Features Concept

About: Bond = loan with structured payments. Issuer (govt, corp, supranat), maturity, par/face, coupon rate, frequency (semi-annual standard for US), currency.Tóm tắt: Trái phiếu = khoản vay có cấu trúc. Issuer, maturity, par, coupon rate, frequency, currency.
  • Issuer Government, corporation, supranational, financial.
  • Maturity Years to redemption.
  • Par / Face Principal amount returned at maturity (commonly $1,000).
  • Coupon rate Annual interest as % of face.
  • Coupon freq. Annual, semi-annual (US), quarterly, monthly.
  • Currency Domestic vs foreign vs Eurobond.

2. Indenture & Covenants Concept

About: Indenture = legal contract. Affirmative covenants (must-do, e.g. pay interest, maintain ratios). Negative covenants (must-not, e.g. additional debt). Protect bondholders.Tóm tắt: Hợp đồng pháp lý. Affirmative (phải làm), negative (không được làm). Bảo vệ trái chủ.
  • Indenture Legal contract between issuer and bondholders.
  • Affirmative Obligations the issuer must do (pay interest, maintain ratios).
  • Negative Things issuer must NOT do (additional debt, asset sales).

3. Embedded Options Concept

About: Callable = issuer's option (hurts bondholder, higher yield). Putable = holder's option (lower yield required). Convertible = into equity (equity-like upside).Tóm tắt: Callable (issuer chọn, yield cao), putable (holder chọn, yield thấp), convertible (chuyển sang equity).
  • Callable Issuer can redeem early — benefits issuer, hurts bondholder, requires higher yield.
  • Putable Holder can demand early redemption — benefits holder, lower yield required.
  • Convertible Bondholder can convert to equity — equity-like upside.

Practice problem Practice

Practice problem

Bond A is callable at issuer's option; Bond B is putable at holder's option. All else equal, which trades at a higher yield?

Show solution
Callable: hurts holder — issuer redeems when rates fall. Holder demands higher yield.
Putable: helps holder — can sell back when rates rise. Holder accepts lower yield.
Callable bond (A) trades at a higher yield.