Stock Market Glossary
coupon
Interest payment of a bond to the holder.
In brief: Interest payment of a bond to the holder.
Meaning in practice
The coupon is usually paid annually or semi-annually. Its ratio to the current rate results in the current interest rate; the yield to maturity (YTM) is the more honest comparison number.
Context for investors and traders
For investors, the term becomes practical in the context of objectives, time horizon, risk capacity and costs. A suitable solution can differ between two people even when they consider the same product or metric.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
