Put Provision

AAA

DEFINITION of 'Put Provision'

A condition that allows a bondholder to resell a bond back to the issuer at a price - which is generally par - on certain stipulated dates prior to maturity. The put provision is an added degree of security for the bondholder, since it establishes a floor price for the bond. This mitigates the risk of a decline in the bond price in the event of adverse developments such as rising interest rates or a deterioration in the credit quality of the bond issuer.

INVESTOPEDIA EXPLAINS 'Put Provision'

Since a put provision gives the bondholder the right but not the obligation to sell or "put" the bond to the issuer, it is akin to the sale of a put option by the bond issuer to the bondholder. As a result, a bond with a put provision will generally be priced higher than a comparable bond without a put provision.

RELATED TERMS
  1. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
  2. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  3. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  4. Put-Call Ratio

    A ratio of the trading volume of put options to call options. ...
  5. Credit Quality

    One of the principal criteria for judging the investment quality ...
  6. Class 3-6 Bonds

    Several classes of noninvestment grade bonds held by an insurance ...
Related Articles
  1. When Your Bond Comes Calling
    Bonds & Fixed Income

    When Your Bond Comes Calling

  2. Prices Plunging? Buy A Put!
    Options & Futures

    Prices Plunging? Buy A Put!

  3. Short selling vs. purchasing a put option: ...
    Options & Futures

    Short selling vs. purchasing a put option: ...

  4. What does it mean when a bond has a ...
    Investing

    What does it mean when a bond has a ...

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center