Original Issue Discount - OID
Categories: Bonds
Original Issue Discount (OID) is the difference between the face, or par, value of a bond and the amount actually paid for the bond.
Example:
You buy a $1,000 bond but you pay $822 for it because it's a zero coupon bond, which doesn't pay interest. You get a nice discount to its par value of a grand when you buy the bond, and you get the full face value when it matures. The difference between the discount rate and the money you get at maturity is the original issue discount. (In this case, it's $178.)