Fixed income

From WilmottWiki

Fixed Income

Fixed Income is the term applied by banks and other institutions to that part of their business which is related to bonds or their derivatives. It has been used in a very high level manner to also cover instruments such as swaps, swaptions, caps/floors, interest rate accrual products and other exotics. Confusingly, many of the instruments traded in Fixed Income, have anything but fixed cash flows. The term really applies to any instruments whose cash flows are known at the inception of the contract, but has since been relaxed to cover products with variable payments and optionality. Some firms refer to this side of their business more simply as "Rates". Many banks also include credit derivatives within Fixed Income.

According to John F Marshall's Dictionary of Financial Engineering a Fixed Income Security is one which "...meets one or more of the following tests: (1) Pays a fixed sum periodically (2) Pays a fixed sum at maturity (3) Pays a formula-determined amount periodically or (4) pays a formula-determined amount at maturity."