Types of Bonds
Other Types of Bonds
Other bonds include register vs. bearer bonds, convertible bonds, exchangeable bonds, asset-backed securities, and foreign currency bonds.
Learning Objectives
Classify the different types of bonds
Key Takeaways
Key Points
- Bonds directly linked to interest rates include fixed rate bonds, floating rate bonds, and zero coupon bonds.
- Convertible bonds are bonds that let a bondholder exchange a bond to a number of shares of the issuer 's common stock. Exchangeable bonds allows for exchange to shares of a corporation other than the issuer.
- Asset -backed securities are bonds whose interest and principal payments are backed by underlying cash flows from other assets.
- Subordinated bonds are those that have a lower priority than other bonds of the issuer in case of liquidation.
- Foreign currency bonds are issued by companies, banks, governments, and other sovereign entities in foreign currencies, as it may appear to be more stable and predictable than their domestic currency.
Key Terms
- LIBOR: The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks.
- tranches: One of a number of related securities offered as part of the same transaction.
- gross domestic product: A measure of the economic production of a particular territory in financial capital terms over a specific time period.