Index Linked Security

From Open Risk Manual


Index Linked Security. A type of bond in which the payment of interest on the principal is related to a specific index, such as the Consumer Price Index

This feature provides protection to investors by shielding them from changes in the underlying index. The bond's cash flows are adjusted to ensure that the holder of the bond receives a known Real Rate of Return. There may also be a kind of security where the coupon payments fluctuate according to an "Index" in the sense of non Interest rate e.g. Inflation Rate, GDP. But more commonly the term Index Linked refers to principal.


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Facts about "Index Linked Security"
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