Debt security is a financial instrument representing a legally binding loan agreement between a creditor and a debtor, where a creditor is a buyer or an investor and a debtor is an issuer. In return for the loan, the buyer will receive interest or discount from the par value on a specified rate and time. Holders of debt securities are paid before shareholders in the event of the issuer’s liquidation.

In general, the main features of debt securities include issuer name, par value, maturity date, coupon rate, coupon payment date, type of debt security and covenants.

Debt securities can be categorized in the following ways:

1.By tenor : short-, intermediate- and long-term debt securities.

2. By payment of interest : fixed-coupon rate, floating rate, compound interest rate, zero coupon, etc.

3. By form of issue :

3.1 Scrip form is a physical certificate of debt security issued to the owner with the owner’s name specified on it.

3.2 Scripless form is a debt security in which its ownership is recorded in the security account of the depository with no physical certificate issued to the owner.

4. By issuer :

4.1 Corporate debt securities are debt securities issued by corporations under the supervision of the Securities and Exchange Commission (SEC). These debt securities include bill of exchange, promissory note, debenture, etc.

4.2 Government debt securities are debt securities issued by the Ministry of Finance or government entities in order to mobilize funds from general public and financial institutions.