A certificate of deposit whose interest rate fluctuates in inverse correlation to the value of an underlying market index. In other words, the interest rate paid on the CD increases as the underlying market index decreases in value.


This type of CD is used for two main purposes: speculation or hedging. An investor may want the safety of a CD but with the market exposure of a bear CD. This CD is bearish because the investor is betting that the market will fall during the life of the CD.

This type of instrument is also used to hedge actual market positions. If an investor has a long position that is highly correlated to the underlying market index, he or she may invest his or her excess cash in a bear CD, which can offset losses in the market investment.

  1. Index-Linked Certificate Of Deposit

    A certificate of deposit (CD) with a return based on a specific ...
  2. Liquid Certificate Of Deposit

    A certificate of deposit (CD) that allows withdrawls to be made, ...
  3. Brokered Certificate Of Deposit

    A certificate of deposit (CD) that is purchased through a brokerage ...
  4. Variable-Rate Certificate Of Deposit

    A certificate of deposit (CD) with a variable interest rate. ...
  5. Uninsured Certificate Of Deposit

    A certificate of deposit (CD) which is not insured against losses. ...
  6. Automatic Rollover

    1. The transfer of qualified retirement plan distributions into ...
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  1. Can certificates of deposit (CDs) lose value?

    CDs are FDIC insured, so they do not lose face value, though broker-issued CD accounts do carry risks. Read Answer >>
  2. How are yields taxed on a certificate of deposit (CD)?

    Learn how interest earned on a certificate of deposit is taxed and how this may reduce the total return of an investment ... Read Answer >>
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