The Optimality of Call Provision Terms

Eric Powers ()
Additional contact information
Eric Powers: Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29208

Management Science, 2021, vol. 67, issue 10, 6581-6601

Abstract: There is substantial variation in fixed-price call provision terms—call price premium and call protection. I investigate determinants of call price, call protection, and estimated call option value. Consistent with agency theory and asymmetric information models, I find that lower credit quality and opaque issuers choose higher call premiums, longer call protection, and overall less valuable call options. Higher-quality issuers, particularly financial institutions that struggle when interest rates are low, do the opposite.

Keywords: fixed-price call; callable bond; call premium; call protection (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2020.3774 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:10:p:6581-6601

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().