Originalissue Discount (OID) Financial Glossary

What is it? The amount of the difference between the par or redemption price and the price of the security at the time of its original issue. Issuers can issue securities with OID as an alternative to making periodic interest payments as a means of compensating investors. Zero coupon notes, strips, discount notes, and bankers acceptances are examples of investment types with OID. For those instruments, the return provided to the investor comes in the form of a discount. OID should not be confused with the discounts that investors may pay for either coupon-bearing instruments or discount instruments resulting from a change in prevailing rates subsequent to the issuance of a security. OID is subject to different income tax treatment than discounts resulting from changes in market prices.

Finance Term Definition Added By: Lauren

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