Extendible bond

Extendible bond (or extendable bond[1]) is a complex bond with the embedded option for a holder to extend its maturity date by a number of years.[2][3] Such a bond may be considered as a portfolio of a straight, shorter-term bond and a call option to buy a longer-term bond. This relatively rare type of bond works to the advantage of investors during periods of declining interest rates.[4] Pricing of the extendible bond will be similar to that of a puttable bond.

Sometimes, the bond may be structured so as to give an option to extend to the issuer.[5] In this case, pricing will be similar to that of a callable bond.


For more details on this topic, see Bond option § Embedded options.

Price of extendible bond = Price of straight bond + Price of the option to extend


External links

This article is issued from Wikipedia - version of the 11/2/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.