What is 'Call Premium'

Call premium is the dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.

2. The amount the purchaser of a call option must pay to the writer.

BREAKING DOWN 'Call Premium'

1. The call premium is somewhat of a penalty paid by the issuer to the bondholders for the early redemption.

2. In order to receive the rights associated with a call option, the premium must be paid to the seller.

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RELATED FAQS
  1. Why is a premium usually paid on a callable bond?

    Understand the nature and characteristics of callable bonds, and specifically why those factors lead issuers to offer a premium ... Read Answer >>
  2. How are call options priced?

    Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>
  3. Why doesn't the price of a callable bond exceed its call price when interest rates ...

    A callable bond provides the issuer (borrowing entity) with an option to redeem the bond before its original maturity date. ... Read Answer >>
  4. Why do companies issue callable bonds?

    Learn how callable bonds work, how they include an embedded call option, and understand the additional risks that callable ... Read Answer >>
  5. What does it mean to be long or short a derivative?

    Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ... Read Answer >>
  6. What are the advantages of investing in a callable bond?

    Learn about the biggest advantage to an investor of purchasing a callable bond, which is that it almost invariably pays higher-than-market ... Read Answer >>
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