Callable Bond

A Callable Bond, also known as a redeemable bond, is a fixed-income security that grants the issuer the right, but not the obligation, to repurchase the bond from the bondholder at a specified call price and date before the bond's scheduled maturity, typically when interest rates have fallen significantly below the bond's coupon rate. This embedded call option provides the issuer with refinancing flexibility, but introduces call risk for the investor, who may be forced to reinvest the principal at a lower prevailing interest rate.