Tag Info

Hot answers tagged

7

There is nothing in simple cubic spline fitting routines that would prevent arbitrage. Even with conscientious use of knot points and smoothing techniques you may end up with simple spread and local volatility arbitrage conditions. Stochastic volatility models on the other hand can explicitly constrain your solutions to prevent call/ put spread arbitrage at ...


2

These are relatively common, especially in convertible bonds. You are correct that the effective maturity of the bond becomes the call/put date. The reason for issuing them is fairly prosaic: a 10 year bond with a 3 year call/put date counts as a 10 year liability for accounting purposes, and of course a 3 year instrument for trading purposes. The latter ...


1

UBS launched a series of these around 1997-98. One needs to see the Offering Memorandum to see the full details and the reference trigger for the put and call. In the case of the UBS bonds (they were the ibanker, not the issuer), they issues 3/10 and 3/30 put-table and callable bonds. What they really were (and what these probably are): the bond buyer ...



Only top voted, non community-wiki answers of a minimum length are eligible