Call Protection

What is a 'Call Protection'

A call protection is a protective provision of a callable security prohibiting the issuer from calling back the security for a period early in its life.

BREAKING DOWN 'Call Protection'

The call protection is advantageous to investors because it prevents the issuer from forcing redemption early on in the life of a security. This means that investors will have a minimum number or years, regardless of how poor the market becomes, to reap the benefits of the security.

The period for which the bond is protected is known as the "deferment period" or the "cushion".

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RELATED FAQS
  1. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  2. 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 >>
  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. What are the advantages of investing in a callable bond?

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  5. What risk factors should investors consider before purchasing a callable bond?

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  6. 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 >>
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