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5#
发表于 2011-7-11 19:45
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1morelevel Wrote:
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>
>
> Yeah but that assumes credit risk.
***no it doesn't, if there is no access to financing then good luck putting your bonds (think how much a put option was worth in late 08 on the most credit worthy borrowers. Also, perhaps you (the bond holder) have been primed by new bank debt with certain covenants against certain finance actions, then once again good luck.
> A callable
> bond that has an american call (continuous) in a
> default free low transaction cost environment, a
> callable would very rarely trade above call unless
> there was a good reason why the market thought the
> bond would not be called (maybe the market knows
> the issuer has a hedge behind).
*** again not true, refinancing cost (i.e legal and underwriting fees) can be high enough to deter a borrower from refinancing at a lower rate. Or the borrower could be unsophisticated and just not call bonds (sometimes for many years, even though it's economic to do so) OR the coupon is so high that even a "continuously" callable bond would trade at a premium because the yield to the next call date (at the earliest 30 days, but typically ~6mo from first call) is still positive... and there are a half dozen other examples but i'll stop here
> A callable will
> trade above par if the call structure is one time
> or discrete, at which point the market can trade a
> bond at the yield to call or yield to next call.
>
> Assume you had a continuously putable default free
> bond with a put price of 100.
*** doesn't exist
> Assuming a rational
> market, if anyone offered the bond at less than
> par, a trader could instantly buy the bond and
> exercise the put for an arbitrage profit.
*** let's be clear here, bond options are not like what trades in Chicago, they are tied to the bond so you don't just "exercise" you put options instantly, sorry, not even theoretically.
> Therefore the floor price of the bond is the put
> price. Graphically, this represents more POSITIVE
> convexity than a non callable non putable bond as
> the price curve is more convex.
*** just simply wrong... draw your option free bond line then the putable bond line... true there are inflection points as you approach the put price, but over all the putable bond price curve has LESS convexity at higher rates (just like a steeply discounted option free bond), at higher rates the option value increase at a faster pace then the underlying bond discounts, causing the line to flatten sooner
some of this is outside the CFA curriculum, but i had to correct the comments above |
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