Doubling Option

Posted in Finance, Accounting and Economics Terms, Total Reads: 794

Definition: Doubling Option

It refers to a sinking fund provision. To understand doubling option, let us first understand what is meant by sinking fund. A sinking fund provision requires that the issuer set aside a certain amount of money regularly for the purpose of redeeming the bonds. Now the Doubling Option is a provision or a right of an bond issuer wherein the issuer can double the sinking fund provision so that they can redeem double the number of bonds.

Simply said, if there were x bonds as per sinking fund provision, the issuer now has option to double them (2x) and redeem them. This actually is quite useful during low interest rates.  

Security fund provision is great for security and doubling option uses sinking fund provision.

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