In addition, it suggests that callability
is unlikely to be a key driving force behind secular movements in the Aaa-Treasury spread, because Refcorp bonds are not callable.
of the bond is offset by an enhanced yield, to compensate the investor for the uncertainty created by the call option.
in a deposit will then be a distinguishing feature for offering differential rates on interest on deposits," said RBI.
Callable is equal to one if the bond is callable and zero otherwise and should be positively related to spread if callability
represents prepayment risk from the bondholder's perspective.
Second, we do not include callability
as a variable, as callability
is much less of a factor in pricing of ABS.
Also called the bond agreement, bond covenant, or deed of trust, this is the written agreement setting forth the bond terms, such as maturity date, interest rate, and callability
is the most common provision and appears in 86 percent of the warrant agreements.
Other control variables incorporated by Ingram and Wilson (1999) into a baseline NIC model include credit enhancement, issuing frequency, and callability
of the loans means that there is likely to be demand from mortgagees to buy mortgage bonds when prices fall, reducing the risk of negative equity by refinancing into a loan closer to the property value.
In particular, we control for bond maturity, coupon rate, callability
, sinking fund provisions, subordinate debt, and 144a issues.
Investors may employ hedging strategies and tools to reduce risk, or even "immunize" their investment holdings in stocks, bonds and other debt instruments, commodities, futures, and other investments against almost any conceivable risk, including market risk, sector or industry risk, company or business-specific risk, purchasing power risk, currency risk, interest rate risk, country-specific risk, reinvestment risk, liquidity risk, callability
risk, default or credit risk, selection risk, management or agency risk, etc.
Holding period returns and bond values depend on interest rate term structure dynamics, bond coupon rates relative to term structure yields, contractual provisions (such as callability
or convertibility), and creditworthiness of issuers.