What is the difference between a callable bond and a puttable bond?

What is the difference between a callable bond and a puttable bond Introduction: The World of Bonds Hello everyone, and welcome to our video on callable and puttable bonds. Bonds are a popular investment instrument known for their fixed income and relatively lower risk compared to other assets. However, within the bond market, there are various types of bonds, each with its own set of features and characteristics. Today, we'll be focusing on callable and puttable bonds, two types that have gained significant attention from investors. So, let's dive in! Callable Bonds: A Closer Look Callable bonds, as the name suggests, are bonds that can be called back or redeemed by the issuer before the maturity date. This feature gives the issuer the right, but not the obligation, to buy back the bonds from the investors. Typically, callable bonds have a call date, which is the earliest date the issuer can exercise this option. The call price, which is the price at which the bonds are bought back, is often set at a premium to the face value. This premium acts as an incentive for investors to sell their bonds back to the issuer. From the issuer's perspective, callable bonds provide flexibility, allowing them to refinance the debt if interest rates decline. However, from an investor's standpoint, callable bonds come with a potential risk of having their investment called back, which can disrupt their long-term investment strategy.