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Bunny bonds are sometimes called a multiplier, a fixed rate bond issue which gives the holder the option to receive payments either in cash or as more bonds fungible with the original issue. The investor will exercise the reinvestment option if interest rates fall; hence reinvestment risk is eliminated, and the "duration" of the bond is lengthened (see group description for definition of "duration"). If interest rates rise, the investor will choose to receive coupons in the normal way.

Source Publication:
Financial Terminology Database, Bank of England.

Cross References:
Duration of a fixed income instrument

Statistical Theme: Financial statistics

Created on Tuesday, September 25, 2001

Last updated on Wednesday, April 3, 2013