Extendible bond (or extendable bond[1]) is a complex bond with theembedded option for a holder to extend its maturity date by a number of years.[2][3] Such a bond may be considered as a portfolio of a straight, shorter-term bond and acall option to buy a longer-term bond. This relatively rare type of bond works to the advantage of investors during periods of declining interest rates.[4] Pricing of the extendible bond will be similar to that of aputtable bond.
Sometimes, the bond may be structured so as to give an option to extend to the issuer.[5] In this case, pricing will be similar to that of acallable bond.
Price of extendible bond = Price of straight bond + Price of the option to extend
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