Cash Management Bill

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Accrued interestCoupon earned from the last coupon date up to settlement, paid by the buyer to the seller on top of the negotiated price, because the issuer will pay the whole coupon to whoever holds the bond next.
• Bond Equivalent YieldThe annualised simple-interest return on a money market instrument, computed on price and a 365-day year, so instruments of different maturities can be compared on one basis.
• Call moneyUncollateralised overnight lending and borrowing of funds between scheduled commercial banks and primary dealers — the shortest segment of the Indian money market.
• Call optionA contract giving its buyer the right, but never the obligation, to buy the underlying at a fixed strike price — so the loss is capped at the premium and the gain is not.
• ConvexityThe curvature of the price-yield relationship — the correction duration misses, because duration is a straight line and the true relationship bends.
• Coupon rateThe rate of interest a bond pays, applied to its face value and never to its market price — which is why the coupon tells you the cash flow but not the return.