Stocks have only two types, common stock or preferred stock , and are limited to few characteristics. Bonds on the other hand, have different qualities, maturities and yields. The outcome of this diversity is more issuers , and issues of bonds with different characteristics, which makes it difficult for bonds to be traded on exchanges. Another reason why bonds are traded over the counter is the difficulty in listing current prices .
Stock prices are affected by news events, the P/E ratio of a company and, ultimately, the demand and supply of shares, which are reflected in the daily stock price. On the other hand, bond prices are affected by changing interest rates and credit ratings . Since trade time between issues can last weeks or even months, it is difficult to list current prices for a particular bond issue, which makes it difficult to trade bonds on the stock market .
(For information regarding bond pricing mechanisms, refer to Get Acquainted With Bond Price/Yield Duo .)
This question was answered by Chizoba Morah
Hedging also occurs when an individual or institution buys an asset (such as a commodity, a bond that has coupon payments , a stock that pays dividends, and so on) and sells it using a futures contract. The individual or institution has access to the asset for a specified amount of time, and can then sell it in the future at a specified price according to the futures contract. Of course, this allows the individual or institution the benefit of holding the asset, while reducing the risk that the future selling price will deviate unexpectedly from the market's current assessment of the future value of the asset.
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