Glossary of Municipal Securities Terms


An option, sold by an issuer to a third party, to exercise a call on a bond. Typically, such option will permit the third party to require the issuer to exercise a mandatory call for tender of its bonds in a specified amount and at a specified time for purchase by the third party at a specified price. The call rights granted to the third party by such option often are structured consistently with the typical optional redemption provisions of municipal securities that may not carry detachable calls. Although from the bondholder’s perspective the terms of a security with a detachable call may be identical to a security that has optional redemption provisions that are not detachable, the bondholder may perceive that the likelihood of an optional call being exercised is altered by the fact that the power to exercise such call is held by a person or entity other than the issuer. See: REDEMPTION PROVISIONS; TENDER OPTION.

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