标题: IR Collar [打印本页] 作者: chunty 时间: 2011-7-11 19:46 标题: IR Collar
Constructing an IR collar you buy an IR call option and sell an IR put option.
Why not buy both? Wouldn't you be protected from both upsides and downsides?作者: SFoyil 时间: 2011-7-11 19:46
That would cost something. The argument here is to sell a put and use the proceeds to buy a call.作者: Rasec 时间: 2011-7-11 19:46
the collar is meant to hedge a floating rate liability, by selling the put you fund the call option premium (so zero or near zero cost) and create a band with which you ensure your liabiliaty cost作者: tikfed 时间: 2011-7-11 19:46
you could buy both, but then you have to absorb costs.
If you buy one and sell the other, there is no cost作者: tarunajwani 时间: 2011-7-11 19:46
You can also protect against falling interest rates (if you have a floating rate asset) by buying a floor and selling a cap.
