Mandatory call risk Sample Clauses
The "mandatory call risk" clause defines the risk that a security, such as a bond or preferred stock, may be redeemed or "called" by the issuer before its scheduled maturity date, typically at a predetermined price. This clause applies to financial instruments that include call provisions, meaning the issuer has the right to repay the principal and terminate the investment early, often when interest rates decline or other financial conditions are favorable to the issuer. Its core practical function is to alert investors to the possibility that their expected returns could be shortened or altered, thereby allocating the risk of early redemption to the investor and ensuring they are aware of potential changes to their investment timeline.
Mandatory call risk. Investors trading CBBCs should be aware of their intraday “knockout” or mandatory call feature. A CBBC will cease trading when the underlying asset value equals the mandatory call price/level as stated in the listing documents. Investors will only be entitled to the residual value of the terminated CBBC as calculated by the product issuer in accordance with the listing documents. Investors should also note that the residual value can be zero.