A debt instrument (security) that gives the issuer the option to pay interest (coupon) either in cash (any form of money) or in kind, i.e., with financial securities. The option covers a specific period over the course of the security’s life, typically an initial period starting at issue date. The security’s price will be affected by the type of settlement (payment of similar securities or cash).
Payment-in-kind securities come in two types: payment-in-kind bonds and payment-in-kind preferred stock.
It is known for short as PIK security.
