The features of a bond are
determined by characteristics such as duration,
repayment, interest rate,
currency and issue price.
The borrower may make scheduled or unscheduled repayments
(redemption of the debt).
Scheduled repayment
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Typ
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Description
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Bullet bonds
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With this type of bond, the nominal value
is usually repaid to the investor in a one-off payment at end of the duration.
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Annuity bonds
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This type of bond is repaid in staggered partial payments over the course
of the duration.
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Callable bonds
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These bonds are usually repaid on different dates on the basis of a draw. There
is normally a repayment-free period and a repayment period during which several draws determine
which bonds are repaid.
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Unscheduled repayment
The terms and conditions of the bond may entitle the issuer to repay the bond prematurely. The issuer
exercises this right to premature repayment if it no longer needs the capital or can refinance at more
favourable conditions in the capital market.
The terms and conditions of the bond may also provide for a call right for the buyer. Retractable
bonds, extendible bonds and perpetual bonds are bond types that feature unscheduled repayment.
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Typ
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Description
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Retractable bonds
| Retractable bonds give the
investor the right to have the nominal value repaid at a predetermined time
or in several partial payments on several different dates. If this right (also called
"option") is not exercised, the bond runs until final maturity or the next option date
under the same terms and conditions.
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Extendible bonds
| Extendible bonds give the investor
the right to extend the duration of the bond by a certain amount of time
to one or more predetermined dates. If this option is not exercised, the bond is repaid at the end
of the ordinary duration. If the duration is extended, the bond exists for the relevant duration
under the same terms and conditions.
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Perpetual bonds
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Perpetual bonds are bonds with no fixed duration. Repayment occurs only in the
event that the company is liquidated. However, it is possible to provide for premature repayment.
The interest rate is either fixed for the entire duration or fixed for the first period (for
example ten years) and subsequently determined for additional periods of equal length in
accordance with a formula laid down by the terms and conditions of the bond.
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