Auction Rate Bond - ARB

Filed Under »
Dictionary Says

Definition of 'Auction Rate Bond - ARB'

A debt security with an adjustable interest rate and fixed term of 20-30 years. An auction rate bond's (ARB) interest rate is determined through a modified Dutch auction (where the price starts high and gets lower and lower until buyers are found) on a set schedule every seven, 14, 28 or 35 days. Non-profit institutions and municipalities utilize ARBs as a means to reduce borrowing costs for long-term financing.
Investopedia Says

Investopedia explains 'Auction Rate Bond - ARB'

The rates on ARBs are set in a similar way to how rates on new U.S. Treasury bills are set when they are issued. However, when an auction fails due to a lack of buyers, both bondholders and bond issuers are negatively impacted. The bondholders can't sell what is supposed to be a liquid investment and issuers are forced to pay higher default rates (set when the bonds were initially sold).

Articles Of Interest

  1. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.
  2. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.
  3. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  4. The Copper King: An Empire Built On Manipulation

    Find out how Yasuo Hamanaka's actions in the copper market forever changed the rules for commodity traders.
  5. 7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  6. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...
  7. Private Equity A Trendsetter For Stocks

    In this article, we'll show you how private equity sets the trend for stocks everywhere.
  8. Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. Formally known as the CBOE Volatility Index, the VIX is a benchmark ...
  9. Giants of Finance: Charles Dow

    Find out how this financial visionary helped everyday people enter the world of finance.
  10. Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center