European Callable Bond
A bond that can be redeemed by the issuer at a predetermined date prior to maturity. Investopedia Says:
The main cause of a call is a decline in interest rates since the first date of issue. If the interest rate is lower on the call date, the issuer would likely call the current issue of bonds and distribute a new issue at a lower interest rate. These types of bonds pose interest rate risk to bondholders, though not as much as an American callable bond (which can be called at any time).
After the call date, the bond behaves similarly to a vanilla bond with a similar coupon and time to maturity. Related Terms:
American Callable Bond
Call Premium
Callable Bond
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