bond classification

Definition

As a fixed income security, a bond is classified according to (1) Collateral: whether the bond is fully secured by a specific asset that can be sold by the bondholder to satisfy a claim (see secure bond), or is secured only by the issuer's reputation and credit (see debenture). (2) Convertibility: whether the bond can be exchanged for other securities of the issuing company at a future date (see convertible bond). (3) Maturity: whether the bond has one maturity date or several, and how long is the maturity period: longer the maturity period, greater the risk and higher the interest rate. (4) Price: whether the bond is sold below par value, at par value, or above par value. (5) Transfer method: whether it is a bearer-bond or a registered bond.