Discount

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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.


See also