An auction rate security (ARS) is a debt instrument with a variable interest rate that is reset at periodic intervals through a dutch auction. The interest rate on an ARS is determined by the interaction of supply and demand in the auction. Investors looking to purchase an ARS submit bids at various interest rates, with … Read more
A capital note is a debt security issued by a corporation in order to raise capital. Capital notes typically have a maturity date of five to seven years and pay interest semi-annually. The proceeds from the sale of capital notes are typically used to fund working capital needs or to finance capital expenditures. Are capital … Read more
The dated date is the day on which a security is first traded in the secondary market. For most securities, the dated date is the same as the settlement date. However, for some securities, the dated date is different from the settlement date. The dated date is used to determine the interest payment date and … Read more
A basis rate swap is an interest rate swap where the floating rate is based on a short-term reference rate, such asLIBOR, and the fixed rate is based on a long-term government bond yield. The swap allows investors to lock in a fixed rate for a period of time, while still being able to benefit … Read more
Definition, Types, and How to Invest. What is a debt security? A debt security is a type of investment that represents a loan that has been made by an entity to another entity. Debt securities are typically issued by corporations and governments in order to raise funds for their operations. There are various types of … Read more
Negative arbitrage is a trading strategy that involves taking advantage of price discrepancies in different markets to generate profits. The trader essentially buys an asset in one market and sells it in another market where the price is higher, pocketing the difference. Negative arbitrage can be a useful tool for hedging against market risks, as … Read more
A bearer instrument is a security that does not have a named holder and is therefore transferable by delivery. Bearer instruments are often unregistered, which makes them more attractive to criminals who can more easily launder money or engage in other illicit activities with them. Are bearer bonds taxable? Bearer bonds are taxable, but the … Read more
A bond swap is an agreement between two parties to exchange one bond for another. The terms of the swap are negotiated between the parties and can be customized to the needs of each party. The most common type of bond swap is the exchange of a government bond for a corporate bond, but swaps … Read more
Rediscounting is the process of borrowing funds from a central bank or other financial institution, using eligible commercial paper as collateral. The commercial paper is typically issued by a corporation for the purpose of financing short-term working capital needs. The borrowing company pays a fee for the service, which is typically a percentage of the … Read more
A Variable Rate Demand Note (VRDN) is a type of debt instrument that typically pays interest at a variable rate. VRDNs are generally issued by large financial institutions and have a relatively long maturity date. Interest payments on VRDNs are usually made on a monthly or quarterly basis. VRDNs can be an attractive investment for … Read more
