Extendible Bond

Another type of embedded option that resembles a put option is an extension option: At maturity, the holder of an extendible bond has the right to keep the bond for a number of years after maturity, possibly with a different coupon. In this case, the terms of the bond’s indenture or offering circular are modified, but the bond remains outstanding. Examples of extendible bonds can be found among Canadian issuers such as Royal Bank of Canada, which, as of July 2013, has a 1.125% semi-annual coupon bond outstanding that matures on 22 July 2016 but is extendible to 21 July 2017.

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