Financial terms starting with “Z”

3 terms · plain-language definitions for lifelong students and investors · Full glossary

Z-Spread: The parallel shift in the spot Treasury curve that equates the discounted cash flows of a bond to its market price, assuming the cash flows occur as scheduled (no option exercise). A cleaner measure than nominal yield spread because it uses the full curve rather than a single Treasury maturity, but still option-blind -- which is why OAS exists for embedded-option bonds.
Zero Lower Bound: The theoretical floor of zero percent for nominal interest rates, below which conventional monetary policy loses effectiveness because banks would simply hold cash rather than lending at negative rates. The zero lower bound led central banks to develop unconventional tools like quantitative easing and forward guidance.
Zero-Based Budget: A budgeting method where you allocate every dollar of income to a specific category until income minus allocations equals zero. Unlike traditional budgeting (which starts from last month's numbers), zero-based budgeting forces a deliberate decision on every dollar. Popular for people trying to eliminate spending drift.

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