Callable bonds
A call option lets the issuer repay the bond early, usually from a set date or at a price set by a "make-whole" formula. Issuers tend to call when rates fall, so investors face reinvestment risk; callable bonds therefore offer a higher yield. Yield-to-call and yield-to-worst help compare them.
Puttable bonds
A put option lets the investor sell the bond back to the issuer at a set price on specified dates, which protects holders and lowers the yield.
Floating-rate notes (FRNs)
FRNs pay a coupon equal to a reference rate plus a fixed margin, reset every three or six months. Reference rates today are mostly overnight risk-free rates such as SOFR, SONIA and €STR, or EURIBOR for euro issues.
Zero-coupon bonds
A zero-coupon bond pays no interest. It is issued at a discount and repaid at par, so the return comes from the price rising towards 100.
Perpetual and hybrid bonds
Perpetual bonds have no maturity date and are usually callable after five or more years. Bank Additional Tier 1 (AT1) bonds and corporate hybrids can defer or cancel coupons and may be written down or converted to equity. They are complex and suited only to experienced investors.
Convertible and exchangeable bonds
Convertibles can be converted into the issuer's shares at a set price; exchangeables convert into shares of another company. They combine bond and equity risk.
Amortising and sinking-fund bonds
Some bonds repay principal in instalments rather than all at maturity, which shortens their average life.