Buyers reap a grim gain from survivor option bonds, reports WSJ

The Wall Street Journal reports that some professional investors have recently started buying up retail corporate bonds that include a survivor’s option – an option for the holder to redeem the bond early. Such bonds, which are sometimes issued by large investment grade corporates targeting retail investors, typically trade at a discount to other bonds. However, buyers need to team up with a terminally ill person and then wait for them to die to exercise the option.

The article says that there are $83 billion of bonds including a survivor option, based on data from Incapital. The option is designed to allow the relatives of a deceased bond holder to cash in a bond early.