The Hindu Business Line : BSE introduces zero coupon yield curve

THE Bombay Stock Exchange (BSE) is introducing the Zero Coupon Yield Curve with a view to launch exchange traded derivatives in the future. This is part of the exchange's initiatives towards development of debt market.

According to a BSE release, the term structure of interest rates or the yield curve describes the market's view of the interest rates for various lending periods. The instruments that do not make periodic interest payments and where the principal amount and the entire outstanding amount of interest on the instrument is paid as a lump sum amount at maturity are known as zero coupon instruments.

These were sold at a discount to the redemption value and the discounted value was determined by the interest rate payable on the instrument, the release said.

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