Zero-Coupon Convertible Security
1: Zero-coupon bond convertible into the common stock of the issuing company when the stock reaches a predetermined price.
They are apt to trade at a small premium over conversion value and provide a lower yield to maturity than nonconvertible bonds.
2: Zero coupon bond, usually a municipal bond, that is convertible into an interest bearing bond at some point before maturity.
Zero Coupon Security
Debt security that makes no periodic interest payments but is sold at a deep discount from its face value. The bondholder does not receive interest payments, only the full face value at redemption on the specified maturity date. The owner of a zero-coupon bond owes income taxes on the interest that has accrued each year, even though the bondholder does not receive payment until maturity.
There are several kinds of zero coupon securities. The most popular is the zero coupon bond. This bond can either be issued by a corporation or by a brokerage firm when it strips the coupons off a bond and sells the principal and the coupons separately. This technique is used frequently with Treasury bonds. Zero coupon bonds are also issued by municipalities.
Because zero coupon securities do not make interest payment, they are considered more volatile than bonds making periodic payments. When interest rates rise, zeros fall more sharply than interest paying bonds. However, zero coupon securities rise more rapidly in value when interest rates drop.
Zero Minus Tick
Transaction that takes place at the same price as the previous round-lot price, but at a lower price than the last different price--also called a "zero downtick." For example, a stock trade is consecutively executed at $22, $21 and $21. The last transaction at $21 was at a zero minus tick. It was executed at the same price as the prior trade, but at a lower price than the last different price of $22.
Zero Plus Tick
Transaction that takes place at the same price as the previous round-lot price, but at a higher price than the last different price--also called a "zero uptick." For example, a stock trade is consecutively executed at $21, $22 and $22. The last transaction at $22 was at a zero plus tick. It was executed at the same price as the prior trade, but at a lower price than the last different price of $21. Short sales can only be executed on plus tick or a zero plus tick.
ZR (Zero Coupon Issue)
An abbreviation for Zero Coupon Issue that is used in bond listings of newspapers.