Call risk - Definition

The potential for cash flow issues that the holder of a Callable bond enables by allowing the issuer to call the bond before Maturity. Should the issuer Exercise the Option-69'>Call option, the bondholder will likely be forced to reinvest under less favorable conditions. This is because bonds are usually called early so that they can be reissued at a lower Interest Rate. This new lower issue rate means less interest collected by the bondholder.

Ultimately, investors can eliminate call Risk by avoiding non-callable bonds. However, if the investor receives enough compensation for call risk, callable bonds may be a great way to generate high returns.



Terms near "Call risk"

Call swaption
Callable bond
Callable loan
Callable stock
Called away
Called bond
Cambodia Riel
Cameroon Franc
Canadian Dollar
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