Financial Glossary - Z

Z bond: Also known as an accrual bond or accretion bond; a bond on which interest accretes interest but is not paid currently to the investor but rather is accrued, with accrual added to the principal balance of the Z and becoming payable upon satisfaction of all prior bond classes.

Z score: The Statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. Separately, z-score is the output from a credit-strength test that gauges the likelihood of bankruptcy.

Zero-coupon bond:
Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer.

Zero coupon yield curve: The plotting of zero coupon rates against maturity dates.

Zero prepayment assumption: The assumption of payment of scheduled principal and interest with no payments.

Zero-balance account (ZBA):
A checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover checks presented.

Zero-beta portfolio: A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.

Zero-coupon bond:
A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date.

Zero-investment portfolio:
A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy.

Zero-one integer programming:
An analytical method that can be used to determine the solution to a capital rationing problem.

Zero-sum game:
A type of game wherein one player can gain only at the expense of another player.