Bonds with Delayed Amortization Schedules

Summary

The document answers whether a bond can begin amortizing after an initial period of interest-only payments. It confirms that such structures exist, while noting that they do not have a single standard name in the response.

The timing and pattern of principal repayment are generally set by contract between counterparties. Amortization may start on a specified coupon payment date after earlier coupon payments, and the contract can also provide for staged or partial drawdowns of the notional. The brief answer offers no examples of market conventions, pricing implications, or treatment in bond documentation, so readers would need to consult the specific contract to determine the repayment schedule and outstanding principal.

Key ideas

• A bond can have an initial period of interest-only payments before principal amortization begins.
• The amortization start date can be specified as a later coupon payment date.
• The structure is typically defined by the counterparties’ contract rather than a standard product name.
• Notional drawdowns may also be scheduled, including partial or full funding arrangements.

Tags

# Bond whose amortization scheme initiates at a later time in its life?


# Bond whose amortization scheme initiates at a later time in its life?












Is there any type of bond whose amortization initiates at a later time in its life? For example the first year we observe interest-only payments and after year 1 there initiates an amortization schedule.

## Answer by wanna_be_quant (score 1)

https://quant.stackexchange.com/a/54929

Indeed there are. But they do not have a particular name.

They are mostly based on contracts specific to the counter-parties. Amortization can start in a prespecified, say, coupon payment date later than the first initial coupon payments. This also applies to drawdowns of the notional. Fully-drawn, partly-drawn etc.

I hope this helps.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.