Bear CD

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Bear CD

A bear CD pays the holder a fraction of any fall in a given market index.

Bear CD

A certificate of deposit with an interest rate that varies inversely to the performance of some benchmark index. When the index decreases, the CD's interest rate increases, and vice versa. One places money into a bear CD if one believes an index will decline. Alternatively, one invests in a bear CD to hedge against another position. For example, if one has a mutual fund tracking the same index, a bear CD will alleviate some of the risk that the index will decline.