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4#
发表于 2013-4-17 19:37
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You shouldn’t say, “callable worth more”; you should say “callable worth less less”. The direction will still be down, necessarily. Interest rates just affect all three components.
I was trying to get at it before when I said the value of the call ranges from near 0, to the value of the non-callable bond:
Scen 1: Interest rates go way down and approach zero. The bond is called under all conditions, and there is little to no value in a callable bond, since the option is worth near the bond price.
Scen 2: Interest raise rise very, very high. The option has little chance to be exercised, and has no value; in this situation the value of the callable bond is near the same as the non-callable bond. BUT! This value is low, since a high interest rate reduces the value of the bond (PV of cash flows) – everything is going toward zero here.
The true statement in the problem says “interest rates are rising in a low-interest environment, the value of the callable bonds should decrease.” Value of everything is going to decrease, and you’re correct that the degree of the decrease will depend on the strike amount; however that doesn’t change the fact that the callable bond will decrease, too. |
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