Period of Call Protection
In callable bonds, a period of time during which a bond may not be prematurely redeemed. Interest payments are guaranteed during the call protection period but not afterward. The bond may be redeemed at any point after the call date, which means that the issuer could return the principal to bondholders and interest payments would cease. The period of call protection exists to protect bondholders from the risk that interest rates will fall before the call date. The period of time is often called the cushion.
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The period following the issue of a security during which it cannot be called by the issuer. Also called deferred call period, period of call protection, preferred call period. See also call protection.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.