IPath
Encyclopedia
In finance, the iPath refer to a family of exchange-traded notes (ETN).
The iPath combine the investment aspects of bonds
and exchange-traded funds (ETF). The first iPath securities were issued in 2006 and are registered under the Securities Act of 1933
, because they are issued by banks, not by investment companies.
The iPath trade close to their intra-day trading value and usually have a 30 year maturity. However, they may be redeemed (with a minimum of 50,0000 units) every Thursday- unlike the daily redemption feature of ETFs. They may also be traded on the secondary market
.
Although an iPath security
may be linked to an underlying market index
its value may change even if there is little or no movement in the index, in the event that the credit rating
of the issuer changes, e.g. if the issuer receives a rating downgrade.
The iPath combine the investment aspects of bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
and exchange-traded funds (ETF). The first iPath securities were issued in 2006 and are registered under the Securities Act of 1933
Securities Act of 1933
Congress enacted the Securities Act of 1933 , in the aftermath of the stock market crash of 1929 and during the ensuing Great Depression...
, because they are issued by banks, not by investment companies.
The iPath trade close to their intra-day trading value and usually have a 30 year maturity. However, they may be redeemed (with a minimum of 50,0000 units) every Thursday- unlike the daily redemption feature of ETFs. They may also be traded on the secondary market
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
.
Although an iPath security
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
may be linked to an underlying market index
Bond market index
A bond market index is a composite listing of bonds or fixed income instruments and a statistic reflecting the composite value of its components...
its value may change even if there is little or no movement in the index, in the event that the credit rating
Credit rating
A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
of the issuer changes, e.g. if the issuer receives a rating downgrade.