Chapter 14
The Yield to Call
Definition of the Yield-to-Call
When a bond is callable, i.e., redeemable prior to maturity at the issuer’s option, the cash flow implicit in the yield-to-maturity figure is subject to possible early alteration. Most corporate bonds issued today are callable, but with a certain period of call protection before the call option can be exercised. At the expiration of this period the bond may be called at a specified call price which usually involves some premium over par. This call price may decline in steps towards par in accordance with a specified time schedule.
To provide some measure of the return in the event that the issuer were to exercise his call option at some future point, the yield-to-call is often computed ...
Get Inside the Yield Book: The Classic That Created the Science of Bond Analysis, 3rd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
