Callable Security

AAA

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.

RELATED TERMS
  1. Forced Conversion

    The occurrence of an issuer of a convertible security exercising ...
  2. Redemption

    The return of an investor's principal in a fixed income security, ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer ...
  4. Fixed Income

    A type of investing or budgeting style for which real return ...
  5. Call Provision

    A provision on a bond or other fixed-income instrument that allows ...
  6. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
Related Articles
  1. Bond Call Features: Don't Get Caught ...
    Bonds & Fixed Income

    Bond Call Features: Don't Get Caught ...

  2. Callable Bonds: Leading A Double Life
    Options & Futures

    Callable Bonds: Leading A Double Life

  3. Convertible Bonds: An Introduction
    Bonds & Fixed Income

    Convertible Bonds: An Introduction

  4. A corporate bond I own has just been ...
    Investing

    A corporate bond I own has just been ...

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center