Call Option

In derivatives markets, a call option in is a contract that gives the buyer of the option the right, but, not the obligation to buy a specified amount of an underlying security or asset at a specified price within a specified time before expiry. An American-style option gives the holder the right to exercise at any time up to expiry. In a European-style option, the holder can only exercise on the expiry date. A Bermudan option allows exercise on pre-set days until expiry. Callable and putable bonds are examples of securities that have embedded Bermudan options. A callable bond allows the bond issuer the right to redeem the bond on specific dates and on specific terms, prior to the original redemption date. In a putable bond , the investor has the right to compel the issuer to redeem the bond on specific dates The detailed terms are found in the bond documentation.


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