Coupon
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The Law and Lore of Repackaging
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Interest. Derives from the traditional means of paying interest on a definitive, security-printed bearer bond, wherein each interest payment was represented by a detachable perforated strip on the side of the bond - you know, like coupons in the newspaper - which the bondholder would tear off and present to the paying agent in return for the interest payment in question.
Hence the fabled journey each year of the Belgian dentist in which he would set out in his Citroën 2CV with only his favourite pork-pie hat, a brown suit and a battered suitcase full of carefully clipped coupons, cross the border, present his coupons to the Luxembourg paying agent, meet his great pal the Luxembourg netting specialist at Aéroport Hercule Poirot and the two of them, like Hunter S. Thompson and his Samoan attorney, only from the Low Countries, depart on a two-week mescaline and amphetamine-fueled orgy across the Spanish Mediterranean before returning to their respective practices, the Belgian’s a maxillo-facial practice in Brussels’ red-light district, the Luxembourgische, a commercial law partnership on Avenue J. F. Kennedy, by the first day of September.
Coupon stripping
Each coupon, once detached, is its own transferable promissory note and can trade in the same way as the bearer bond from which it was detached trades. One can make a vigorous livelihood from arbitraging the value of attached and detached coupons. This is called coupon stripping.
The good old days
Of course, there aren’t any security-printed bonds any more: everything is in dematerialised, book-entry form - so these days a “coupon” can refer to any interest-like payment, under loans, swaps etc, or specifically to the interest payment obligation under a bond as a discrete financial instrument from its host bond.
These days, the only place you're likely to encounter a real coupon is framed and on the wall of an ironic but cool restaurant in Transylvania.