Faster Learning Tutorials

Debt security definition

Buyers of debt securities buy the obligation to be repaid principal plus interest. Buyers of equity securities buy the opportunity for growth. That's where the differences begin.
  1. Define - Define debt securities.
  2. Context - Use debt security in a sentence.
  3. Quiz - Test your knowledge.
by Paul Alan Davis, CFA, July 16, 2016
Updated: December 31, 2018
It is helpful to compare and contrast debt securities with equity securities. Keep reading to learn the distinctions between the two.

Outline Back Next

~/ home  / finance  / glossary  / debt security

Debt Security


A Debt Security is an investment in the debt or leverage side of a business or government entity. In the event of a bankruptcy, debt securities are given higher priority than equity securities.

The owner of a debt security is interested in a fixed and stable return in the form of periodic interest payment. Typically debt securities mature and at that time the investor is returned a final principal payment.

Debt security prices are sensitive to prevailing interest rates and decrease in value when interest rates rise because alternative assets return a higher fixed payment. The opposite is true when interest rates fall.

Synonyms: bond, note, fixed-income

In a Sentence

Liz:  In this deck, must I define a debt security ? These days it's like, don't sue me.
Sue:  To the former, yes, and to the latter, huh?


Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.

Videos can also be accessed from our YouTube Channel.

Video Script

If this term had a video, the script would be here.


Click box for answer.

Debt securities suffer capital losses when interest rates ____. | Fall or Rise?


Questions or Comments?

Still unclear on debt securities? Try out the course Quant 101.

Related Terms

Our trained humans found other terms in the category investment vehicles you may find helpful.

What's Next?

Subscribe and show your support.

  • To see all terms in the Glossary, click Outline.
  • For a few words about the covariance matrix, click Back.
  • To learn about how and why demeaned returns are important, click Next.

Outline Back Next

~/ home  / finance  / glossary  / debt security

debt securities
bond investments
investment notes
fixed income investments
fixed income securities
investing in bonds
fixed income funds
interest rate sensitive investments
fixed income products
fixed income bonds
coupon payments
fixed income market
fixed income assets
debt instruments
financial leverage
interest-bearing investment
financial modeling
debt investments
investment opportunities
income investments