Hard Call Protection

Posted in Finance, Accounting and Economics Terms, Total Reads: 1530

Definition: Hard Call Protection

Hard call protection is for protection against the callable bonds being called before a certain period. The bonds are protected for a specific duration of time irrespective of the rate of interest. They cannot be called as long as they are protected.

E.g. Company A has issued X bonds which has a protection period of  Y years. from the date when the bond/security is being issued. This assures the holder that the company will not be able to call back the bonds that are outstanding before Y years.

The simple reason is if there is decline in the rate of interest, most callable bonds will be called. This would be an issue for the investor. Hence, the protection is what ensures that the holder of the bond can gain even when the rate of interests are fluctuating. Using this a guaranteed return is set for the investors after a certain time period, which would be beneficial.

Hence, this concludes the definition of Hard Call Protection along with its overview.

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