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?

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  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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