Discount
When an asset trades below its stated, par or intrinsic value.
Quick answer
A discount is an asset trading below its par or intrinsic value.
Definition
A discount is when an asset trades below its par or intrinsic value, meaning you can buy it for less than it is notionally worth. Discounts appear on bonds, funds and some structured products. For traders it is the opposite of a premium and signals a specific market view.
How It Works
- It is the reverse of a premium
- It can signal value or risk, depending on context
- Bonds and funds commonly trade at discounts
Trading Tips
1
Ask why it is at a discount before assuming it is cheap
2
Compare it to the premium side of the same asset
3
Read the reason before the price
Related Terms
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