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Call Premium

What is 'Call Premium'

Call premium is the dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.

Explaining 'Call Premium'

1. The call premium is somewhat of a penalty paid by the issuer to the bondholders for the early redemption.


Further Reading


Setting the optimal make-whole call premium
www.tandfonline.com [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Callable bonds, reinvestment risk, and credit rating improvements: role of the call premiumCallable bonds, reinvestment risk, and credit rating improvements: role of the call premium
www.sciencedirect.com [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Dynamic recapitalization policies and the role of call premia and issue discountsDynamic recapitalization policies and the role of call premia and issue discounts
www.jstor.org [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Behavioral aspects of the design and marketing of financial productsBehavioral aspects of the design and marketing of financial products
www.jstor.org [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

The effect of refinancing costs and market imperfections on the optimal call strategy and the pricing of debt contractsThe effect of refinancing costs and market imperfections on the optimal call strategy and the pricing of debt contracts
onlinelibrary.wiley.com [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Put-call parity and market efficiencyPut-call parity and market efficiency
www.jstor.org [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Transactions costs and the relationship between put and call pricesTransactions costs and the relationship between put and call prices
www.sciencedirect.com [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

The call, sinking fund, and term-to-maturity features of corporate bonds: An empirical investigationThe call, sinking fund, and term-to-maturity features of corporate bonds: An empirical investigation
www.jstor.org [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

To call or not to call convertible debtTo call or not to call convertible debt
www.jstor.org [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …

Financial indexes and instruments based thereonFinancial indexes and instruments based thereon
patents.google.com [PDF]
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond's remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium. The commonly accepted …



Q&A About Call Premium


Why does an issuer pay out a call premium?

The issuer pays out a call premium as penalty for early redemption.

How do options values vary with time?

Option values vary with time.

What happens if there are no market conditions at that time?

If there are no market conditions, then nothing happens.

How does volatility affect an option's value?

Volatility affects an option's value.

What does it mean when you say that someone has the right but not obligation to buy an agreed quantity of something from someone else?

The buyer has the right, but not obligation, to buy an agreed quantity of something from someone else.

What is a call premium?

The call premium is the dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.

How much does an issuer pay for early redemption?

The amount paid by an issuer varies with different securities and depends on market conditions at that time.