Mastering Python for Finance - Second Edition

Puttable bonds

Unlike callable bonds, the owner of puttable bonds has the right, but not the obligation, to sell the bond back to the issuer at an agreed price during a certain period. Owners of puttable bonds are considered to have bought a put option from the bond issuer. When interest rates increase, values of existing bonds become less valuable and puttable bond holders are more incentivized to exercise the right to sell the bond at a higher exercise price. Since puttable bonds are more beneficial to buyers than to the issuers, they are generally less common than callable bonds. Variants of puttable bonds can be found in the form of loan and deposit instruments. A customer who has placed a fixed-rate deposit with a financial institution ...