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Finance Dictionary and Glossary of Investment Terms
Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. Bonds are usually called when interest rates fall so significantly that the issuer can save money by issuing new bonds at lower rates.
Able to be redeemed prior to maturity. The term usually applies to bonds and convertible securities. The issuer of a callable security has to state the conditions under which the security may be called at the time of issue. For most securities, there is a certain initial time period in which the security cannot be called. A bond will usually be called when market interest rates fall below the yield being paid on the bond (bonds are usually called when the price rises to a certain point). To reflect this risk, a callable security is usually priced lower than a non-callable security.