A bond that has an embedded option that allows investors to switch between two types of securities. For instance, an investor may be allowed to switch between a long-term and a short-term fixed-rate note or between a fixed-income security and equity.
A flip-flop bond could also refer to a variable-rate fixed-income instrument that allows the issuer a degree of flexibility embodied in the ability to shorten or extend the term of the instrument (such as a note, bond, etc) on the rate reset date in response to changes in interest rates.
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