标题: Reading 54: Valuing Bonds with Embedded Options-LOS f 习题精 [打印本页]
作者: 土豆妮 时间: 2010-4-20 15:49 标题: [2010]Session 14-Reading 54: Valuing Bonds with Embedded Options-LOS f 习题精
Session 14: Fixed Income: Valuation Concepts
Reading 54: Valuing Bonds with Embedded Options
LOS f: Explain the effect of volatility on the arbitrage-free value of an option.
As the volatility of interest rates increases, the value of a callable bond will:
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C) |
rise if the interest rate is below the coupon rate, and fall if the interest rate is above the coupon rate. | |
As volatility increases, so will the option value, which means the value of a callable bond will decline. Remember that with a callable bond, the investor is short the call option.
作者: 土豆妮 时间: 2010-4-20 15:49
On a given day, a bond with a call provision rose in value by 1%. What can be said about the level and volatility of interest rates?
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A) |
The only possible explanation is that level of interest rates fell. | |
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B) |
A possibility is that the level of interest rates remained constant, but the volatility of interest rates fell. | |
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C) |
A possibility is that the level of interest rates remained constant, but the volatility of interest rates rose. | |
As volatility declines, so will the option value, which means the value of a callable bond will rise.
作者: 土豆妮 时间: 2010-4-20 15:50
As the volatility of interest rates increases, the value of a putable bond will:
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C) |
rise if the interest rate is below the coupon rate, and fall if the interest rate is above the coupon rate. | |
As volatility increases, so will the option value, which means the value of a putable bond will rise. Remember that with a putable bond, the investor is long the put option.
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