Doomsday Call

DEFINITION of 'Doomsday Call'

A call option that is added to a bond and allows the issuer to redeem the bond early. The doomsday call is also referred to as the Canada call because bonds issued by Canadian corporations often include them. When the call is exercised, the issuer pays back the principal and accrued interest before maturity.

BREAKING DOWN 'Doomsday Call'

Doomsday calls, when exercised, can reduce the yield of a bond because they shorten the term of the bond and, therefore, the overall interest paid. Nevertheless, the doomsday call provision ensures that the price paid for the bond creates a specific yield for the bondholder and the exercise of one reduces risk, since it pays the principal back early.