New answers tagged

3

Aren’t both statements incorrect? In a puttable bond, the investor is LONG the put. In a callable bond , the investor is SHORT the call. It may be true that put price = call price for ATM options, but being long a put is always better than being short a call.


1

The rise in yields were not a cause of the crash. Global equity valuations were very high leading up to the crash against a solid macroeconomic backdrop in the years preceding. Eventually, growth began to fade and optimism did as well, feeding into the financial channels leading up to black Monday.


1

To the investor, a callable bond can be seen a ordinary bond plus a short position in a call. If the strike price is higher, the call has less value, and the "package" ordinary bond minus call has more value.


1

A callable bond is a little like a put. Companies issue them to protect against a drop in interest rates, and with a higher call price, interest rates need to drop even further to be called. In essence, in the same way a put with a lower strike is more desirable to a buyer, a callable bond with higher call value will be priced higher than otherwise ...


2

A bond repays its notional face value (plus interest sometimes), not the original purchase price. Do not assume the the price you pay for a bond is its face value. Sometimes a law or a regulation (pretty useless, in my humble opinion:) does require that a bond newly issued in primary market be sold at exactly 100% par price (face value). Then the coupon ...


3

That simply means that a bond pays one unit of the currency in any state (regardless what happens in the future, i.e. there is no default risk about the payoff of a bond). So you will receive 1 in the next period (regardless what you paid for it). Of course, today you probably pay less than 1 due to time value of money...


0

talk to your advisor or cohort regarding sources available through your school. else: What data sources are available online?


2

Reasons why the net basis might trade negative from time to time : 1) if a credit crisis occurs, investors do not have the resources to invest in the basis. For example , banks are unwilling or unable to provide repo financing. Or, investors do not have the cash required for the haircut on the repo financing. Hence the basis traded negative during the ...


Top 50 recent answers are included