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	LaSalle Broker Dealer Services: Callable Bonds Risk and Return (Site not responding. Last check: 2007-10-15)
		A corporation issuing a callable bond or a bank issuing a callable CD (“issuer”) has the right, but not the obligation, to “call” the bond at a specified date or dates in the future.
		Callable bonds may be suitable, and even optimal, for an investor but one must also be aware of the basic risks involved.
		Callable bonds should be viewed as higher yielding short term investments which have the possibility of becoming long-term investments in a rising interest rate environment.
	www.lnbgo.com /fixed_income/callable_bonds.html (1054 words)

	Fixed Income: How Bonds Work
		Callable bonds are bonds that the issuer can repay early, sometimes after a period of several years, at a predetermined price.
		If the bond holder then reinvests the principal in bonds, he or she will likely have to accept a lower coupon rate, one that is more consistent with prevailing interest rates.
		The bond is callable after five years at a price of 103 (that is, 103% of the face value, or $30,900).
	personal.fidelity.com /products/fixedincome/howbondswork.shtml (1185 words)

	ALTERNATIVE TESTS OF AGENCY THEORIES OF CALLABLE CORPORATE BONDS Magazine: Financial Management, Winter, 1994 (Site not responding. Last check: 2007-10-15)
		By issuing callable bonds in period t, however, managers mitigate the effects of bond mispricing because they simultaneously issue another instrument (the call option) that is equally mispriced in the opposite direction.
		Among the B- rated bonds, Moody's upgraded 60% of the noncallable bonds and 24% of the callable bonds, a difference that is statistically significant at the 0.05 level.
		For example, most five-year bonds are callable after three years; most seven-year bonds are callable starting in year five; most ten-year bonds can be called in either five or seven years; and nearly all 30-year bonds are callable in ten years or refundable in ten years and callable immediately.
	mgv.mim.edu.my /Articles/00265/960101.Htm (9578 words)

	Understanding Callable Bonds (Site not responding. Last check: 2007-10-15)
		The additional yield you receive on callable bonds MAY OR MAY NOT be enough to compensate you for this uncertainty.
		To illustrate the problem of call risk in bonds, let’s look at an analogy from the liability side of the balance sheet: Assume that a banker could issue a deposit instrument which had a final maturity of five years with certain conditions attached.
		We can be sure, though, that if bond prices were to reverse into something like a 1994 bear market, the value of some callable bond portfolios would fall enough to generate serious concern on the part of regulators and Boards of Directors.
	www.cbai.org /Newsletter/AugustSeptember2001/callable_bonds_as2001.htm (1400 words)

	Bonds, Callable or Redeemable
		Callable or redeemable bonds are bonds that can be redeemed or paid off by the issuer prior to the bonds' maturity date.
		Callable bonds are more risky for investors than non-callable bonds because an investor whose bond has been called is often faced with reinvesting the money at a lower, less attractive rate.
		As a result, callable bonds often have a higher annual return to compensate for the risk that the bonds might be called early.
	www.sec.gov /answers/callablebonds.htm (411 words)

	Add Balance with Bonds
		Bonds can provide a predictable stream of relatively high income you can use for living expenses or for funding other parts of your investment plan.
		Some kinds of bonds offer valuable tax advantages and unparalleled opportunities to take advantage of the time value of money, that is, to invest a modest amount with a reasonable prospect of collecting a large amount a few years later.
		Bonds are IOUs from companies, governments and their agencies.
	www.kiplinger.com /basics/archives/2003/04/bonds.html (325 words)

	Active Bond Management - Munich American Re
		Two portfolios can have similar durations, but if their bond maturities are different they will react differently to changes in the shape of the yield curve.
		Callable bonds are short a call option which increases in value as interest rates drop, and buyers of callable bonds will demand more compensation in yield spread to offset the call risk as interest rates decline.
		If interest rates are expected to fall, a manager would sell callable bonds and purchase non-callable bonds to avoid the depreciation in price of callable bonds due to spread widening (negative convexity at work).
	www.marclife.com /research/bondmgt.htm (1317 words)

	TIFF Education Foundation: Convexity
		A callable bond permits a borrower to extinguish debt prior to a bond's stated maturity by paying all monies owed to the lender.
		The key point is that investors in callable bonds never know with certainty when they will get their money back: as interest rates rise, borrowers (e.g., homeowners) have less incentive to refinance, and prepayments fall.
		Bond prices fall when interest rates rise because the future interest and principal payments that bonds generate are worth less in today's dollars.
	www.tiff.org /TEF/glossary/convexity.html (389 words)

	07/08/96 TURBOCHARGED BONDS--SO BETTER BUCKLE UP
		Callable step-ups are high-quality bonds with an above-market interest rate, a call feature, and a coupon that increases annually over the life of the bond.
		Today, callable step-up bonds, which are actually derivatives sold by stockbrokers in denominations as little as $1,000, are designed to be much more balanced across varied interest-rate environments, so demand is picking up.
		The $2.2 billion in callable step-up notes issued so far this year is more than the $2.1 billion issued in all of 1995, according to Securities Data.
	www.businessweek.com /1996/28/b3483118.htm (864 words)

	callable bond Definition
		A bond which the issuer has the right to redeem prior to its maturity date, under certain conditions.
		Basically, the company can reissue the same bonds at a lower interest rate, saving them some amount on all the coupon payments; this process is called "refunding." Unfortunately, these are also the same circumstances in which the bonds have the highest price; interest rates have decreased since the bonds were issued, increasing the price.
		The bond will stop paying interest shortly after the bond is called, so there is no reason to hold on to it.
	www.investorwords.com /671/callable_bond.html (262 words)

	Callable Bonds (Site not responding. Last check: 2007-10-15)
		The loser in a callable bond transaction is the investor who owns the bond.
		When the proceeds from the called bond are received, the investor will no longer be able to reinvest the money in a new bond that pays as high an interest rate as previously received.
		If the bond, however, were not called and using the same reinvestment rates, the total accumulation would have been much greater.
	www.winke.com /rdfs/rdfs/callbonds.htm (685 words)

	Municipal bonds FMSbonds.com: Tax-free Bond Specialists
		Such bonds are no longer the responsibility of the original issuer, no longer appear on its balance sheet and are considered "defeased." In such a case, the relationship between the fortunes of the original issuer and the payment of the original bonds ceases to exist.
		To determine if a state tax-exempt bond or bond fund is appropriate, one must compute the tax-exempt bond or bond fund's "taxable equivalent yield." This figure enables one to take federal and state income taxes into account when comparing the potential returns from taxable and non-taxable instruments.
		Typically, when a bond is pre-refunded, its maturity is shortened to the call date and the quality is enhanced because the bond to be called is escrowed in Treasury bonds.
	www.fmsbonds.com /bond_forum1.html (13386 words)

	FIXED-INCOME SECURITIES: MONEY-MARKETS AND BONDS
		Bonds are typically issued with a standard minimum $1,000 denomination face value (par value, the principal amount paid upon redemption of the bond on the maturity date).
		The issuer of the bond may have created it when prevailing interest rates were 8%, but when he/she went to sell the bond on the market, was forced to sell it at the discount price of $800 because prevailing interest rates had increased to 10%.
		Corporate bonds and MBSs tend to widen their yield spread against Treasuries when interest rates are rising and tend to narrow the spread when interest rates are falling, in anticipation of worse and better economic outlook, respectively.
	www.benbest.com /business/debt.html (9538 words)

	Callable Bonds as supplied by EagleTraders.com
		Bonds that may be called for redemption before compulsory maturity as a result of the option exercised by the debtor (issuer), recited in the bond indenture and frequently on the face of the bond certificate.
		Bonds are often issued subject to call, i.e., redemption in whole or in part on any interest date, upon proper notice.
		Callable bonds are also known as optional bonds or redeemable bonds.
	www.eagletraders.com /advice/securities/callable_bonds.htm (289 words)

	45-12-5.1 (Site not responding. Last check: 2007-10-15)
		– (a) Bonds issued by any political subdivision of this state may be issued subject to call and prepayment prior to their stated maturities at the option of the issuer.
		Unless otherwise provided in the proceedings authorizing the issue of bonds, the officers of the political subdivision authorized to sell the bonds shall determine whether the bonds shall be issued subject to call and prepayment, and if issued, the officers shall decide the details of these bonds.
		Bonds may be prepaid with the proceeds of refunding bonds as provided in the following section, or with other funds available for that purpose; and political subdivisions may raise money by taxation for the purpose of prepaying bonds.
	www.rilin.state.ri.us /Statutes/TITLE45/45-12/45-12-5.1.HTM (376 words)

	Callable Bonds (Site not responding. Last check: 2007-10-15)
		Longer bonds that were issued, however, often came with a callable feature attached.
		Callable Bonds represent bonds that entitle the issuing firm or government unit to retire the whole bond issue, or any part of it, before its original maturity date, possibly at a small premium to par.
		This call feature is a major benefit to the issuing party because it entitles them to the opportunity to call in high-interest bonds and replace them with lower-interest bonds, if the rates decrease, reducing their interest expenses.
	winke.com /rdfs/rdfs./callbonds.htm (685 words)

	TheStreet.com: Noncallable Bonds Provide the Joy of Convexity
		Moreover, the longer the duration of a bond, the greater the margin of error.
		A bond only gets called when interest rates are lower than they were when the bond was issued.
		Because as an investor you'd much rather have a noncallable bond, callable bonds are cheaper (their yields are higher) than noncallables, all else being equal.
	www.thestreet.com /funds/bondforum/749419.html (866 words)

	Subsection 3-70-106 Callable Bonds. (Site not responding. Last check: 2007-10-15)
		Any bonds issued may be made callable in the document providing their terms.
		When bonds are made callable a statement to that effect shall be set forth on the face of the bonds.
		Callable bonds may be redeemed on any interest payment date prior to their fixed maturity in the amounts, manner and prices prescribed in the document providing their terms.
	www.ci.alameda.ca.us /code/Chapter_3/70/106.html (61 words)

	Hitting A Home Run With Bonds - Forbes.com (Site not responding. Last check: 2007-10-15)
		At its root a bond is a loan that you, the bondholder, extend to an entity, the issuer; when it comes to issuers there are all kinds.
		Holders of municipal bonds don't pay federal taxes on their municipal bond interest, nor, in most cases, do they pay state income tax if they bought the bond from an issuer in their home state.
		Bond issuers do the same thing by calling their bonds, repaying early and reissuing them at a lower rate.
	www.forbes.com /home/strategies/2005/04/01/cz_dfk_0401bonds.html (1154 words)

	Evaluation of Callable Bonds: Finite Difference Methods, Stability and Accuracy
		The purpose of this paper is to evaluate numerically the semi-American callable bond by means of finite difference methods.
		First, the numerical error is greater for the callable bond price than for the straight bond price, and too large for real applications Secondly, the numerical accuracy of the callable bond price computed for the relevant range of interest rates depends entirely on the finite difference scheme which is chosen for the boundary points.
		Thirdly, the boundary scheme which yields the smallest numerical error with respect to the straight bond does not perform best with respect to the callable bond.
	ideas.repec.org /a/ecj/econjl/v105y1995i429p374-84.html (249 words)

	Callable Bond
		A bond that can be redeemed by the issuer prior to its maturity.
		Usually a premium is paid to the bond owner when the bond is called.
		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.
	baystreet.investopedia.com /terms/c/callablebond.asp (158 words)

	Model for valuing bonds and embedded options
		Given the drawback of the ad hoc approach to bond valuation, greater recognition has been given to the fact that any bond should be thought of as a package of cash flows, with each cash flow viewed as a zero-coupon instrument maEagle Tradersg on the date it will be received.
		An early procedure to determine the fairness of a callable bond’s market price was to isolate the implied value of its underlying option-free bond by adding an estimate of the embedded call option’s value to the bond's market price.
		For example, suppose a 20-year bond is not callable for five years after which time it becomes callable at any time on 30-days notice.
	www.eagletraders.com /advice/model_valuing_bonds.htm (1243 words)

	Callable and Putable Bonds (Site not responding. Last check: 2007-10-15)
		The majority of FHLBank callables are "Bermudan" style, with multiple discrete call dates upon which the bond can be redeemed in whole or in part.
		Putable bonds are subject to repurchase by the FHLBanks at the request of the bondholder before the final stated maturity date.
		Lockout periods - All callable bonds have a lockout period - the period between issuance and the first potential call date.
	www.fhlbof.com /products/callable.html (458 words)

	Re: Refundable vs. Callable bonds (Site not responding. Last check: 2007-10-15)
		It is not an option that can be exercised at a later date, as in the term callable.
		I mentioned the "tax arbitrage" issue that Fabozzi tells us in footnote 6 on this same page is not allowed by IRS rules in certain settings, as a good reason that some issuers choose to refund.
		I also said in class that most refunded bonds were not callable, but this is not the case as Fabozzi describes.
	www2.tltc.ttu.edu /hein/_4329spring2003/00000022.htm (172 words)

	Navistar Closes On $190 Million Convertible Bond Sale; Offering Consistent With Previously Announced 2003 Financing ...
		The non-callable bonds, with a 2.5 percent coupon and five-year maturity, were priced at par and are convertible into 5.5 million shares of Navistar common stock at $34.71 per share, a 30 percent premium to the closing price at the date of the convertible bond issuance.
		Lannert, Navistar vice chairman and chief financial officer, said that the company liked the low coupon on the convertible bonds but was concerned about dilution for shareowners and therefore the company bought a call option on 5.5 million shares at $34.71 per share.
		Both calls have five-year maturities to match the bonds and should the $53.40 call be in the money at maturity, Navistar has the option to settle in cash or in Navistar common stock.
	www.theautochannel.com /news/2002/12/18/151794.html (754 words)

	Finance24 : Empowering Financial Decisions (Site not responding. Last check: 2007-10-15)
		The new bond (LGL1) was launched at a spread of 120bps over the benchmark R153 bond to yield a fixed semi-annual interest coupon of 8.93%.
		Not only is this Liberty"s debut capital bond issue, but we believe it is the first public issue in the domestic bond market for the South African life assurance industry.
		The bond was placed by Standard Bank Corporate and Investment Banking, JP Morgan Securities South Africa (Proprietary) Limited and Andisa Capital.
	www.finance24.com /articles/displaysens.asp?articleid=339346&Ticker=LGL (512 words)

	Lowering risk on callable bonds
		While bonds with call options are not frequently offered in India, they are a common feature in the US.
		If General Electric, for instance, offers bonds with four-year call protection, it means that the company cannot call back the bonds before four years.
		The reason is that bonds with non-refunding provision carry a lower interest rate.
	www.blonnet.com /iw/2001/05/27/stories/0727g151.htm (345 words)

	An Empirical Examination of the Embedded Options In Callable Corporate Bonds (Site not responding. Last check: 2007-10-15)
		Call option values are estimated using triplets of callable and noncallable bonds during the period from January 1973 to March 1994.
		Differences in tax treatment and liquidity among bonds in a triplet affect the call value and therefore are considered in examining the call values.
		Interest rate and remaining maturity of a callable bond have a negative effect on the call values.
	www.iaes.org /conferences/past/montreal_48/prelim_program/g20-1/DollyKing.htm (274 words)

	Callable U.S. Treasury bonds: optimal calls, anomalies, and implied volatilities
		The prices for callable U.S. Treasury securities, available for the period 1926–95, provide the sole source of evidence concerning the implied volatility of interest rates over this extended period.
		Our technique for estimating implied volatilities enables us to address two important issues concerning callable bonds: the apparent presence of negative embedded option values and the optimal policy for calling these, and similarly structured, deferred-exercise embedded option bonds.
		We show that the frequency of mispriced bonds is time-varying and that there also exist irrationally underpriced bonds.
	www.ideas.uqam.ca /ideas/data/Papers/fipfedawp97-1.html (402 words)

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