1. Combine issuer complexity with portfolio design: Issuers with less financial sophistication may pose greater disclosure or governance risk, but may exercise call options less efficiently. For some investors, this trade-off may very well be attractive.
2. Reinterpret yield differences: A better yield on a callable bond from an advisor-heavy issuer can only compensate for the upper probability of call. Yield alone may be misleading without being depending on the behavior of the issuer.
3. Look beyond the initial call date: Advance refunds and redemption mechanisms are only as necessary as stated cancellation policies. Advisors facilitate these transactions and extend the sensible reach of the decision option.
References
http://dx.doi.org/10.1037/0021-843X.103.2.212 Ang, A., Green, RC, Longstaff, FA, & Xing, Y. 2017. Advance Refundings of Municipal Bonds. Journal of Finance 72: 1645–1682.
Brancaccio, G. and K. Kang. 2025. “Search Frictions and Product Design in the Municipal Bond Market.” Econmetrica 93, No. 6: 2159–2199.
Chen, H., Cohen, L. and Liu, W. 2024. “Calling All Issuers: The Debt Monitoring Market.” Management Science 71(8): 6367–6391.
Garrett, DG 2024. “Conflicts of Interest in Advising and Underwriting Municipal Bonds.” Review of Financial Studies 37, No. 12: 3835-3876.
Garrett, DG, and Malakar, B. 2026. “The Evolving Role of Municipal Financial Advisors in the 21st Century.” Public budget and finance 0: 1-24.
Harris, LE and MS Piwowar. 2006. “Secondary Trading Costs in the Municipal Bond Market.” Journal of Finance 61, No. 3: 1361-1397.
Luby, MJ and Orr, P. 2019. “From NIC to TIC to RAY: Estimating the Lifetime Cost of Capital for Municipal Borrowers.” Municipal Finance Journal 39(4): 29–45.
Malakar, B. 2024. “Fiduciary Duty in the Municipal Bond Market.” Municipal Finance Journal Volume 45, Numbers 2-3, Summer-Fall 2024.
