Still not finding the answers you need? These risks are generally intensified in emerging markets. In the event of a default, the buyer receives the face value of the bond or loan from the protection seller. An Overview A bond's coupon rate is the rate of interest it pays annually, while its yield is the rate of return it generates.
Of course, many other factors go into determining the attractiveness of a particular bond: Thus, bonds with higher coupon rates provide a margin of safety against rising market interest rates.
In this case, the protection seller has to compensate for shortfall in interest without any limit. Your Money. In this, A is the protection buyer and B is the protection seller. All rights reserved. Coupon rates are fixed, but yields are not. Conversely, a bond with a higher coupon rate than the market rate of interest tends to raise in price.