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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Escrow

Definition:

Something (usually money) held by an independent third party for the buyer and seller in a transaction until the transaction goes through.

Think of it a little like a standoff in the Old West: The Big Bad comes in with Suzie Mae, who was kidnapped a week ago. The hero comes in with the cash to pay the ransom. Nobody wants to make a first move, so the sheriff takes both Suzie Mae and the cash for a minute and hands both Big Bad and the hero what they got in the exchange. No guns drawn, and a tumbleweed rolls by.

Escrow is like that... but a lot less tense. 

Securities and cash are often held in escrow until they get the green light from the escrow agent (the guy who's holding this stuff) saying that both sides have fulfilled their obligations; the agent then releases the assets to the respective parties.