 |
Definition of 'Callable Security'
A security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.
|
 |
Investopedia explains 'Callable Security'
The conditions of the call provision are established at the time the security is issued. Callable securities are commonly found in the fixed-income markets and allow the issuer to protect itself from overpaying for debt.
For example, a bond issuer may choose to redeem a certain issue when the current market rate falls below the coupon rate of the bond by a set amount. This allows the issuer to reissue the bonds at a lower rate and avoid paying a higher interest rate.
|
-
Find out more about these dangerous and exciting cousins to regular bonds.
Read More »
-
Learn why early redemption occurs and how to avoid potential losses.
Read More »
-
Find out about the nuts and bolts, pros and cons of investing in bonds.
Read More »
-
|
|