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Callable Security

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Dictionary Says

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 Says

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.

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