101 call protection: Difference between revisions
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''Security investment''. | ''Security investment''. | ||
A form of soft call protection for lenders/investors in securities, designed to mitigate the adverse effects of ''call risk'' for investors. | A form of soft call protection for lenders/investors in securities, designed to mitigate the adverse effects of ''call risk'' for investors. | ||
Soft call protection requires the payment of a 1% premium to the investor, on any early redemption of a callable bond by the borrower/issuer. | Soft call protection requires the payment of a 1% premium to the investor, on any early redemption of a callable bond by the borrower/issuer. | ||
At early redemption the premium becomes payable, together with principal and outstanding interest at the call/redemption date. | At early redemption the premium becomes payable, together with principal and outstanding interest at the call/redemption date. | ||
The premium sometimes applies only for an early part - for example just the first year - of the life of a security (the security becoming freely callable after that initial period of 101 call protection). | The premium sometimes applies only for an early part - for example just the first year - of the life of a security (the security becoming freely callable after that initial period of 101 call protection). | ||
== See also == | == See also == | ||
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* [[Callable bond]] | * [[Callable bond]] | ||
* [[Soft call protection]] | * [[Soft call protection]] | ||
[[Category:Corporate_financial_management]] | |||
[[Category:Financial_risk_management]] | |||
Revision as of 19:13, 26 July 2013
Security investment.
A form of soft call protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
Soft call protection requires the payment of a 1% premium to the investor, on any early redemption of a callable bond by the borrower/issuer.
At early redemption the premium becomes payable, together with principal and outstanding interest at the call/redemption date.
The premium sometimes applies only for an early part - for example just the first year - of the life of a security (the security becoming freely callable after that initial period of 101 call protection).
