Price compression

Definition:

The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Risk-averse

Describes an investor who, when faced with two investments with the same expected return but different risks, prefers the one with the lower risk.

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