Bond put option definition principal

A:A put option on a bond is a provision that allows the holder of the bond the right to force the issuer to pay back the principal on the bond. A put option gives the bond holder the ability to receive the principal of the bond whenever they want before maturity for whatever reason. If the bond holder feels that the prospects of the company are weakening, which could lower its ability to pay off its debts, they can simply force the issuerer to repurchase their bond through the put provision.

It also could be a situation in which interest rates have risen since the bond was intially purchased, and the bond holder feels that they can get definitin better return now in other investmentsThis article needs attention from an expert in Business and Economics. Please add a reason or a talk parameter to this template to explain the issue with the article.

WikiProject Business and Economics may be able to help recruit an expert. (November 2008)The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. Traders use prihcipal to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.

Bond put option definition principal most common types of bonds include municipal bonds and corporate bonds. Very often the bond is negotiable, that is, the ownership of the instrument can be transferred in the secondary market. Bond with a terminal payment at maturity (principal) which is substantially larger than any intermediate coupon payment (ie: coupon bond with constant semiannual coupon payments and principal payment at maturity).

A basis point is the smallest measure used in quoting yields on bonds and definittion. One basis point is.01% of yield.

Bond put option definition principal

Principal option bond definition put