The risk-return profile of callable (non-amortizing) and prepayable (amortizing) securities is therefore not symmetrical. Investors in these securities have limited upside price potential. Investors are not willing to pay large premium prices for assets that can be called. Investors use the term “price compression” to refer to the inability of such securities to trade at prices significantly above par. However, these securities can have significant downside price potential. To compensate investors for this asymmetric and unfavorable risk profile, callable and prepayable securities must offer higher yields. The following table summarizes callable and.
