Doubling Option

DEFINITION of 'Doubling Option'

A sinking fund provision that gives a bond issuer the right to redeem twice the amount of debt when repurchasing callable bonds. A doubling option allows the issuer to retire additional bonds at the sinking fund's call price.

BREAKING DOWN 'Doubling Option'

This option will usually be exercised as current interest rates move lower than the bond's yield. The firm will be motivated to repurchase more debt through the sinking fund option and refinance itself at the lower rates.

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RELATED FAQS
  1. I have discovered that a bond I am interested in has a sinking fund. What does this ...

    First, understand that a sinking fund provision is really just a pool of money set aside by a corporation to help repay a ... Read Answer >>
  2. In what ways can a sinking fund affect bond returns?

    Find out how a bond sinking fund provision impacts the likely returns on a corporate bond, and learn why investors should ... Read Answer >>
  3. What are the tax benefits of establishing a sinking fund?

    Understand what a sinking fund is and what companies use it for, along with the tax and general financial benefits that a ... Read Answer >>
  4. Under what circumstances might an issuer redeem a callable bond?

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  5. Why doesn't the price of a callable bond exceed its call price when interest rates ...

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

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