A snowball that is associated with a call option (callability). The issuer has the right to call at face value (100%) on each coupon payment date. Typically, a snowball pays a fixed coupon over the initial interval (first year) and a variable coupon determined as follows:
Variable coupon= previous coupon + V – LIBOR
Where: V is an increasing coefficient (it increases on a regular basis).
Callable snowballs are priced using backward induction.
