The bonds that ratings agencies rate below 'BBB' (Standard & Poor's) or 'Baa' (Moody's)

The possibility that the borrower will not pay back all or part of the interest or principal as promised

The amount of additional compensation investors must receive for purchasing securities that are not free of default risk

The ease with which a financial claim can be resold. The greater the marketability of a financial security, the lower is its interest rate.

The interest rate that is expected to exist in the future

The price at which a call option can be exercised

The credit ratings of bonds, principally those issued by Standard & Poor's and Moody's, ranked in order of the perceived probability of their default and published as letter grades, with the highest-grade bonds being those with the lowest default risk

The graph of the relationship between interest rates on particular securities and their yields to maturity. To construct yield curves, bonds must be as similar in as many other characteristics as possible.

The relationship between yield and term to maturity on securities that differ only in length of time to maturity; graphically approximated by the yield curve

Additional interest paid by borrowers who issue illiquid securities to obtain long-term funds; the interest premium compensates lenders who acquire a security that cannot be resold easily or quickly at par value

The forward rate of interest is implied by the difference between a short-term rate and a longer-term interest rate. The implied forward rate is the rate necessary to make funds invested at the short rate and reinvested at the implied forward rate generate a return equal to that which could be obtained by buying the longer-term security.

The theory that maintains that market participants have strong preferences for securities of a particular maturity and holds that they buy and sell securities consistent with these maturity preferences, resulting in the yield curve being determined by the supply of and demand for securities at or near a particular maturity

difference in yield between convertible bonds and similar bonds without a conversion option

The failure on the part of the borrower to meet any condition of the bond contract

The bonds rated in the top four rating categories by Standard & Poor's ('BBB' and higher) and Moody's ('Baa' and higher)

The option of the bond issuer to buy back the bond at a specified price in advance of the maturity date. The price (call price) is usually set at the bond's par value or slightly above it.

An observed interest rate at which current transactions take place

Bonds that can be exchanged for common stock

The difference in interest rates between callable and comparable noncallable bonds

The option allowing the investor to sell an asset to the put issuer at a predetermined price

The option allowing the investor to convert a security into another type of security at a predetermined price

The theory of the term structure of interest rates that suggests investors leave their preferred maturity range only if adequately compensated for the additional risk of investing in a security whose maturity does not match the investors' investment horizon. This theory is an extension of the market segmentation theory.

The difference in interest rates between puttable and similar nonputtable bonds