Call frequency
Call frequency defines how often a bond issuer has the option to call (redeem) the bond before its maturity. This is important for traders because it affects the bond’s potential return and duration, as issuers may call a bond when interest rates drop to refinance at a lower rate.
Understanding when a bond might be called helps investors forecast their cash flow and re-investment options. Higher call frequency increases the probability of early redemption, reducing the bond's potential long-term return.
Possible values:
- Daily
- Weekly
- Monthly
- Quarterly
- Semi-annual
- Annual
- Continuously
- Discrete
- On aperiodic schedule
- On the effective payment date
- Every coupon
- Every few months
- Every few years
Continuously
The bond can be called at any time without a fixed schedule. This gives the issuer maximum flexibility, making it harder for investors to predict when the bond might be redeemed.
Discrete
The bond can be called at irregular, non-fixed intervals. Often used for structured or complex bonds, calls are triggered by specific events or conditions rather than a calendar.
On aperiodic schedule
Bonds can be called at random or irregular intervals. This is typically seen in highly structured or complex instruments, making it difficult for investors to predict calls.
On the effective payment date
The bond can be called on dates when a coupon payment is due. The call option is directly tied to interest payment dates, making this predictable but dependent on scheduled payments.
Every coupon
Provides opportunities for redemption with each coupon payment.