Discount: Difference between revisions
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1. | 1. ''Discount instruments - noun.'' | ||
In relation to a discount instrument, the discount is the difference between the current market price and the redemption amount. | |||
2. ''Bonds.'' | |||
A coupon-paying bond trading in the market ''at a discount'' has a market value less than its par value. | |||
3. ''Foreign currency - forward market.'' | |||
A currency trading ''at a discount'' in the forward foreign exchange market is weaker in the forward market than in the spot market. | |||
4. ''Verb - financial instruments.'' | |||
In relation to financial instruments, to exchange an instrument with a future maturity date, for a 'discounted' market value today. | |||
' | Today's market value being smaller than the redemption amount (receivable at maturity) by the amount of the discount. | ||
5. ''Verb - discounted cash flow.'' | |||
In relation to a money amount, to discount is to make smaller. | |||
For example, to discount back a future cashflow to a (smaller) present value in discounted cash flow (DCF) analysis. | |||
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* [[Discount instruments]] | * [[Discount instruments]] | ||
* [[Discount rate]] | * [[Discount rate]] | ||
* [[Discounted cash flow]] | |||
* [[Premium]] | * [[Premium]] | ||
* [[Spot market]] | * [[Spot market]] | ||
Revision as of 13:36, 3 March 2019
1. Discount instruments - noun.
In relation to a discount instrument, the discount is the difference between the current market price and the redemption amount.
2. Bonds.
A coupon-paying bond trading in the market at a discount has a market value less than its par value.
3. Foreign currency - forward market.
A currency trading at a discount in the forward foreign exchange market is weaker in the forward market than in the spot market.
4. Verb - financial instruments.
In relation to financial instruments, to exchange an instrument with a future maturity date, for a 'discounted' market value today.
Today's market value being smaller than the redemption amount (receivable at maturity) by the amount of the discount.
5. Verb - discounted cash flow.
In relation to a money amount, to discount is to make smaller.
For example, to discount back a future cashflow to a (smaller) present value in discounted cash flow (DCF) analysis.
