Call provision

An embedded option of a callable bond that gives the issuer the right to redeem all, or part of the bond, before the specified maturity date.

Callable bonds present investors with a higher level of reinvestment risk than non-callable bonds. As such, callable bonds have to offer a higher yield than otherwise similar non-callable bonds.

Some callable bonds come with a call protection period.

European-style callable bonds allow the issuer to redeem only on one specified call date.

American-style callable bonds allow the issuer to redeem anytime after the first call date.

Bermuda-style callable bonds allow the issuer to redeem only on specified dates after the first call date.

See also: Make-whole call provision

Compare: Put provision

Also Known As:
Callable bond
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