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标题: synthetically adding/removing calls from call/noncall debt [打印本页]

作者: joehogue    时间: 2011-7-11 19:22     标题: synthetically adding/removing calls from call/noncall debt

uhhhhhh....anyone else skipping over this? If not can you explain to me like I am a fourth grader
作者: Darien    时间: 2011-7-11 19:22

long/short receiver swaption? Can't explain anything...now.

I'm also wondering why not use interest rate options directly.



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 04:59PM by deriv108.
作者: zwjy    时间: 2011-7-11 19:22

selling receiver swaption = call option on bond

If bond is callable, you sell the receiver swaption to remove the call. makes sense?
作者: Zestt    时间: 2011-7-11 19:23

Thanks.

...one second, to remove a call from callable bond:

the bond ISSUER will sell receiver swaption, but
the bond HOLDER will buy receiver swaption.

Am I right?



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 07:18PM by deriv108.
作者: pennyless    时间: 2011-7-11 19:23

a receiver swaption = call option

if you have a callable bond and you want to remove the call, you want to remove the call option and thus "remove" the receiver swaption. or sell it. so to remove the call you sell the receiver option

if you have a noncallable bond and want to add a synthetic call, you buy the receiver option.

it was not specifically mentioned in the LOS so there is no way they can ask us to calculate this shiz unless they wanna tick me off. i imagine if you memorize this concept you should be able to get the 3 choice mc question down. hopefully lol
作者: cityboy    时间: 2011-7-11 19:23

or what paraguay said..man that guy....dont go blowing the curve paraguay
作者: aidebaobao    时间: 2011-7-11 19:23

if add , buy reciever swaption
if remove ,sell
作者: strikethree    时间: 2011-7-11 19:23

skip, thanks for clarification...I thought I understood month ago, but actually didn't.

The buyer of a callable bond is like implementing a covered call on the bond.

Just buy a call [receiver swaption] to remove it.

...easy-peasy...
作者: ll11    时间: 2011-7-11 19:23

goodman2011 Wrote:
-------------------------------------------------------
> if add , buy reciever swaption
> if remove ,sell

I bet you are the bond issuer.



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 07:33PM by deriv108.
作者: lcai    时间: 2011-7-11 19:23

yup and easy...


Brooks was here


Get busy living...or get busy dying


Deriv108, you totally edited and removed your "easy peasy" comment which led directly into my quote continuing a Shawshank Redemption reference. now I just look like an eccentric candidate.



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 07:38PM by SkipE99.
作者: Unforseen    时间: 2011-7-11 19:23

goodman2011 Wrote:
-------------------------------------------------------
> the question is about a debt , I think as a
> investor ,you need not consider this

. I'm totally...idot..thinking in opposite.

The callable bond issuer holds the "call". To remove the call, sell it -- receiver swaption.
作者: jmh530    时间: 2011-7-11 19:23

deriv108 Wrote:
-------------------------------------------------------
> skip, thanks for clarification...I thought I
> understood month ago, but actually didn't.
>
> The buyer of a callable bond is like implementing
> a covered call on the bond.
>
> Just buy a call to remove it.
>
> ...easy-peasy...

Can't recall above...never say it again, in AF.
作者: justin88    时间: 2011-7-11 19:23

deriv108 Wrote:
-------------------------------------------------------
> goodman2011 Wrote:
> --------------------------------------------------
> -----
> > the question is about a debt , I think as a
> > investor ,you need not consider this
>
> . I'm totally...idot..thinking in opposite.
>
> The callable bond issuer holds the "call". To
> remove the call, sell it -- receiver swaption.


Deriv...I think you're confusing yourself....If you are buying a callable bond, you are correct, the issuer holds the call. This is A BAD THING for the investor (except for the higher promised yield of course). As the investor, you would want to BUY a call, not sell a call. You already implicitly sold a call when you bought the bond from the issuer.

Edit:
I take that back...in the case where you're an issuer and you wanted to remove your call option for some reason (in order to pay a lower yield) you're right, the issuer would sell a call.



Edited 1 time(s). Last edit at Sunday, May 15, 2011 at 08:19PM by abushey31.




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