Derivatives
Callable = buy the bond, sell the option
The callable bond is a choice for the issuers who want to avoid the risk of interest rate decreasing
The bond and call option are always traded together and cannot be separated
The issuer pays a higher coupon rate for the callable bond because of the call option
The bond will be retired at the call date if the interest rate in the market has gone down, which means the price of the bond has gone up. This means the issuer can refinance its debt (bond) at a cheaper level
Asset Swaps
Callable Bonds
Putable Bonds
Convertible Bonds
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