| Call Risk | |
 The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem the issue prior to its maturity. This means the bondholder will receive payment on the value of the bond and, in most cases, will be reinvesting in a less favorable environment (one with a lower interest rate). |
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 Typically, bond issuers will call a bond because of the high rate they are paying on the bond. If interest rates have declined since the issuer first issued the bonds, issuers will often call the bond once it becomes callable and will create a new issue at a lower rate. The bondholders will then lose out on the high rate of their bond and will have to invest in a lower rate environment. |
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 Call Features: Don't Get Caught Off Guard - Learn why early redemption occurs and how to avoid potential losses. Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial. Advanced Bond Concepts - This detailed tutorial explains some of the more complex concepts and calculations you need to know for trading bonds, including bond pricing, yield, term structure of interest rates, duration, and much more. Advantages Of Bonds - They may not be sexy, but bonds do have a place in every balanced portfolio. Find out why. |
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