CFA® glossary: Z

5 terms beginning with Z.

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Z-score

An observation restated as the number of standard deviations it sits above or below the mean. It converts any normal variable to the standard normal, so a single table of probabilities serves all. Where it appears →

Z-spread

The constant amount added across the whole spot curve that makes a bond's discounted cash flows equal its price. Arithmetic, unlike the option-adjusted version. Where it appears →

Z-test

A test of a mean using the standard normal distribution, appropriate when the population variance is known. With a large sample it gives almost the same answer as a t-test.

Zero-cost collar

A long put and a short call around a held asset, keeping its value between the two strikes; when the call's premium pays for the put, the protection costs nothing up front. Its price is the upside given away. Where it appears →

Zero-coupon bond

A bond paying nothing until maturity. With nothing to reinvest its promised yield is actually realised, and its duration equals its maturity exactly. Where it appears →