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Fixed-Income Security
An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity.

Unlike a variable-income security, where payments change based on some underlying measure such as short-term interest rates, the payments of a fixed-income security are known in advance.

An example of a fixed-income security would be a 5% fixed-rate government bond where a $1,000 investment would result in an annual $50 payment until maturity when the investor would receive the $1,000 back.

Generally, these types of assets offer a lower return on investment because they guarantee income.

 Fixed Income and Default Models:

  • definitions of yield;

  • naïve models of duration;

  • arbitrage and equilibrium models of the term structure of interest rates;

  • Ho-Lee, Black-Derman-Toy, and Heath-Jarrow-Morton models;

  • short rate and multifactor term structure models applied to interest-rate derivatives;

  • affine and quadratic term structure models;

  • structural and reduced form models of default;

  • models of default correlations.