Certificates of deposit (CD)

Certificate of deposit (CD) is a fixed income security with a short maturity. Certificates of deposit are issued by housing finance institutions, credit unions, businesses, municipalities and banks. Certificates of deposit are discount securities because they are traded at a discount compared to the nominal amount (face value) received at maturity.

Certificates of deposit have a higher risk than treasury bills and therefore also a higher interest rate. Certificates of deposit are traded on the money market. Certificates of deposit are standardized instruments.