The borrowers could be hedge funds, who either are trying to short a stock or scrambling to cover a stock loan that has been called in, or they could be investment houses that need an underlying instrument for a derivatives contract.

FORBES: Shortchanged

Instead they return an amount based upon the performance of an underlying equity instrument, be it an index, a hedge fund or even a single stock.

FORBES: Another Option

Anyhow, they are a debt instrument that trades more on the underlying credit risk of the company or the industry than on movements in interest rates.

FORBES: Dow Jones Interactive