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Redemption Cushion

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Redemption cushion
The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price).
Redemption Cushion
A provision in callable bonds that prevents the bond from being called for a certain period of time. Interest payments are guaranteed during the redemption cushion period but not afterward. The bond may be prematurely redeemed at any point after the call date. A redemption cushion exists to protect bondholders from the risk that interest rates will fall before the call date. The period of time is often called simply the cushion.


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