liquid yield option note

Definition

LYON. Merrill Lynch's proprietary callable bond that combines the features of zero-coupon bonds with convertibility into a fixed number of shares of common stock. In this arrangement, the bond is issued at a large discount on the par value. It is puttable by the holder at his/her option for cash according to a schedule of rising exercise prices, and is callable by the issuer according to another schedule of rising exercise prices. Offered usually by corporations with investment-grade rating and broad name recognition but having volatile equity, LYON was introduced in 1985 and has proved popular with risk-averse investors.
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liquid theory of the term structure liquidate