Auction rate securities
Auction Rate Securities (ARS) are long term, variable rate bonds tied to short term interest rates. They have a long term nominal maturity with the interest rates reset through a Dutch auction, at intervals usually of 7, 28, or 35 days. They trade at par and are callable at par on any interest payment date at the option of the issuer. Although they are issued and rated as long term bonds, they are priced and traded as short term instruments because of the liquidity provided through the interest rate reset mechanism. 
The auction rate market was invented in 1984 by Ronald Gallatin, an investment banker at Lehman Brothers. The idea was to issue long-term securities that could pay their buyers interest rates only slightly above short-term rates. That was accomplished by resetting the rate at periodic auctions. As long as there were willing bidders for the securities, any holder could sell the security at face value whenever there was an auction.
- Auction Rate Securities. California Debt and Investment Advisory Commission.
- Auctions Yield Chaos for Bonds. The New York Times.