The right of the issuer of a convertible to redeem it before maturity at a prespecified price. The call price is usually at par or at a small premium (1-5%) to par. The issuer must pay investors, in addition to the call price, the amount of interest that has accrued between the previous coupon date and the call date.

A bond will be called as soon as its value without the call feature equals the call price. If the issuer redeems its bond when its value is below the call price, then it will be overpaying bondholders. If it doesn’t call it when the value of the bond moves above the call price, it will be missing a opportunity to buy back its debt for less than its market value.