Corporate Bond Market
The major exchanges and the various electronic communication networks play the role of a
corporate bond market. A corporate bond market is mostly an over the counter market. The corporate bond markets are mostly decentralized and dealer based.
Corporate Bonds
The corporate bonds are mostly brought out by the various business firms. The corporate bonds are debt instruments, that have comparatively longer term periods. The corporate bonds mature at least a year after they have been issued.
The term commercial paper could also be used to denote any bond, that has not been issued by a governmental agency.
Commercial Papers
The commercial papers are a type of corporate bond. These are debt instruments, that have considerably shorter term periods.
Corporate Bond Coupon
The interest of the corporate bonds are called coupon. The payment received from the corporate bonds is not exempted from taxation. Certain corporate bonds do not pay the holder any interest. However, the issuers of such bonds pay a considerably big amount of money when the bond is redeemed.
Corporate Bond Call Option
Certain corporate bonds have a call option included in them. This option enables the issuer to redeem his bonds prior to the completion of the term period of the particular bond.
Convertible Bonds
There are certain corporate bonds called the convertible bonds. The holders of the convertible bonds can transform their bonds into equity.
Corporate Bond Indices
There are several corporate bond indices at present. Some of the leading corporate bond indices may be enumerated as below:
- Dow Jones Corporate Bond Index
- Lehman Brothers Corporate Bond Index
Corporate Bond Risk Levels
The corporate bonds have higher levels of risk compared to the bonds issued by the governmental agencies. The level of risk of the corporate bond depends on certain factors. Those factors may be enumerated as below:
- Particular Corporations
- Rating of the Companies
- Present Market Conditions