# Questions tagged [embedded-options]

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### OAS for securities products

Hello I’m new to quantlib so apologies for the stupid question. I want to calculate the OAS for various securitized products (e.g.,ABS,CMO,MBS, TBA). Is there a function to calculate the z-spread then ...
1 vote
615 views

### Interest Rates as Options

Fischer Black published a paper shortly before his death in 1995 considering interest rates as having embedded options when considering the "shadow real interest rate" and the real interest rate. From ...
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1 vote
241 views

### Lottery calls on municipal bonds

I'm trying to independently price several municipal bonds with lottery calls. Based on market prices/yields I can tell that the price, ytw, etc. is not based upon the first viable call. What is the ...
62 views

### Sub-Optimal exercise

I have seen exercise multiples applied to account for sub-optimal exercise of American style options in the case of employee share schemes (as the employees are irrational). I would like to know if ...
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1 vote
884 views

### Lease Accounting / FX Embedded Derivatives: How to Value Floor / Cap Optionality Features

Suppose you have a lease agreement where the functional/domestic currency is RUB and the currency on which the lease is written USD. Let $S$ be the USD/RUB exchange rate (# of rubles per 1 dollar). ...
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3k views

I have few questions about using OAS as a measure of risk: does OAS allow for comparison between bonds with and without embedded options (e.g. a callable bond against a plain vanilla one against a ...
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321 views

### Observed market price for the August-Greece-paid bonds were the NPV of the bond or of an option?

The bonds which Greece has paid had been valued by market as junk once, just before their payment. Given that the observed market value is the net present value of the instrument, why were they so low?...
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357 views

### Which approach is better for modeling option exercise strategies, rational or behavioral?

This question is most relevant to the evaluation of embedded options, such as the refinancing option granted to borrowers in the mortgage and bank loan markets, or the call option present in some ...
• 13.5k
3k views

### How would I value a perpetual bond with an embedded option?

I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it: ...
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943 views

### How to value a floor when a loan is callable?

Certain bank loans pay a spread above a floating-rate interest rate (typically LIBOR) subject to a floor. I would like to find the value of this floor to the investor. Assume for this example that ...
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