What is ‘Parity Bond’
Two or more bond issues with equal rights to one another. In other words, a parity bond is an issued bond with equal rights to a claim as other bonds already issued. For example, unsecured bonds have equal rights in that coupons can be claimed without any one bond having priority over another. Therefore, unsecured bonds would be referred to as parity bonds.
A parity bond is also referred to as part passu bond.
Explaining ‘Parity Bond’
These types of fixed-income securities are commonly issued by municipalities as a way to gather finance capital. Parity bonds are similar to pari passu securities, which are securities or debts that have equal claims on a right. For example, common shares all have equal rights to claim a dividend without one share having priority over another.
Further Reading
- Foreign-currency bonds: Currency choice and the role of uncovered and covered interest parity – www.tandfonline.com [PDF]
- Leverage aversion and risk parity – www.tandfonline.com [PDF]
- Risk parity portfolio vs. other asset allocation heuristic portfolios – joi.pm-research.com [PDF]
- Monetary policy and long-horizon uncovered interest parity – link.springer.com [PDF]
- Uncovered interest parity revisited – onlinelibrary.wiley.com [PDF]
- Uncovered interest-rate parity over the past two centuries – www.sciencedirect.com [PDF]
- Testing uncovered interest parity at short and long horizons during the post-Bretton Woods era – www.nber.org [PDF]
- Credit migration and covered interest rate parity – www.sciencedirect.com [PDF]
- Covered interest rate parity in emerging markets – www.sciencedirect.com [PDF]
