A debt security that represents an amount of money owed by the bond issuer to a bondholder. The issuer is a borrower of funds, while bondholders are investors who seek to gain a return on their funds invested in a given bond issue. Simply speaking, a bond is an I.O.U. between the lender and borrower, but in a pre-determined standard and securitized form- i.e., specifics of the loan and its repayment are determined by the issuer in the bond’s prospectus. An issuer could be a corporate entity, government agency, etc. On the other side, investors include individuals, institutions, government agencies, etc.

The issuer pays regular interest amount (known as coupons) to the bondholder over a specific period. Interest payment may be fixed (and hence provide a fixed rate of return) or variable (floating at regular intervals or resetting dates, based on a floating reference rate).

Bonds have so many forms in accordance with a number of factors including type of interest rate, type of issuer, complexity, etc.

In terms of bond issuers, bonds can be classified as treasury bonds, municipal bonds, government bonds, corporate bonds, etc.

Given the type of interest rate, bonds could grouped as fixed-rate bonds, floating rate bonds, mini-coupon bonds, high-coupon bonds, low-coupon bonds, etc.

Additionally, there are so many complex bond structures including resettable bonds, hybrid bonds, convertible bonds, subordinated bonds, perpetual bonds, etc.