Extendible bond

Extendible bond (or extendable bond^[1]) is a complex bond with the embedded option for a holder to extend its maturity date by a number of years.^[2]^[3] Such a bond may be considered as a portfolio of a straight, shorter-term bond and a call option to buy a longer-term bond. This relatively rare type of bond works to the advantage of investors during periods of declining interest rates.^[4] Pricing of the extendible bond will be similar to that of a puttable bond.

Sometimes, the bond may be structured so as to give an option to extend to the issuer.^[5] In this case, pricing will be similar to that of a callable bond.

Pricing

See also Bond option: Embedded options, for further detail.

Price of extendible bond = Price of straight bond + Price of the option to extend

Price of an extendible bond is always higher than the price of a straight bond because the embedded option adds value to an investor;^[6]
Yield on an extendible bond is lower than the yield on a straight bond.

References

External links

Bond market

Bond Debenture Fixed income

Types of bonds by issuer	Agency bond Corporate bond Senior debt Subordinated debt Distressed debt Emerging market debt Government bond Municipal bond

Types of bonds by payout	Accrual bond Auction rate security Callable bond Commercial paper Contingent convertible bond Convertible bond Exchangeable bond Extendible bond Fixed rate bond Floating rate note High-yield debt Inflation-indexed bond Inverse floating rate note Perpetual bond Puttable bond Reverse convertible securities Zero-coupon bond

Bond valuation	Clean price Convexity Coupon Credit spread Current yield Dirty price Duration I-spread Mortgage yield Nominal yield Yield to maturity Z-spread

Securitized products	Asset-backed security Collateralized debt obligation Collateralized mortgage obligation Commercial mortgage-backed security Mortgage-backed security Yield-curve spread

Bond options	Callable bond Convertible bond Embedded option Exchangeable bond Extendible bond Option-adjusted spread Puttable bond

Institutions	Commercial Mortgage Securities Association (CMSA) International Capital Market Association (ICMA) Securities Industry and Financial Markets Association (SIFMA)

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