Groundlearn / Glossary / Callable bond
Callable bond
A CFA term, defined in plain English with the distinction examiners test.
What it means
A bond the issuer may redeem early, usually when rates have fallen.
Value of callable = Value of straight bond − Value of call
The exam angle
The investor is short the option, so a callable bond yields more and its upside is capped near the call price.
Where it appears in the syllabus
- Fixed IncomeCFA Level I · exam weight 11–14% · Pricing, yield measures, duration, convexity, credit spreads.
- Fixed IncomeCFA Level II · exam weight 10–15% · Term structure dynamics, arbitrage-free valuation, embedded options, CDS.
Related terms
- ConvexityThe curvature of the price–yield relationship — how duration itself changes as yields move.
- DurationThe sensitivity of a bond’s price to a change in yield, and equivalently the weighted average time to receiving its…
- Effective durationDuration measured by repricing the bond under small parallel shifts in the benchmark curve, so that changes in cash…
- Forward rateThe interest rate agreed today for borrowing or lending over a future period, implied by today’s spot curve.
- Spot rateThe yield on a single cash flow received at one future date, with no intervening coupons.
- Coupon rateThe annual interest a bond pays, as a percentage of par.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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