What is a call option

Modified on Mon, 5 Dec, 2022 at 10:13 PM

To exercise a call option ahead of the bond maturity date means the bond issuer has an obligation to pay both the principle and interest to end the borrowing/lending status between the bond issuer and the investor. 

For example, Company A has issued a bond of 1 year maturity but after 8 months, the company decides to exercise a call option. The company is obligated to pay the principle of 4 months ahead and the interest which counts up until the current date. 

If the bond issuer has an intent to exercise such call options, a letter must be issued to notify the investors in prior. The call option is within the rights of the bond issuer under section 9 of the rights and responsibility of the bond issuer and bond holder. 

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