Liquid Yield Option Note - LYON

DEFINITION of 'Liquid Yield Option Note - LYON'

A zero coupon bond that is callable (by issuer), putable (by investor), and convertible. LYONs are synthetic products that are financially engineered by Merrill Lynch.

BREAKING DOWN 'Liquid Yield Option Note - LYON'

A LYON typically assures the holder a positive return. This return is maintained until the opportunity to put the security back to the issuer at a premium over the issue price no longer exists.

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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. Why do companies issue callable bonds?

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  6. Why do bond coupon rates vary so greatly?

    Learn about the two major reasons that cause bond coupon rates to vary so dramatically and what role coupons play in the ... Read Answer >>
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