synthetically adding/removing calls from call/noncall debt

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发表于 2011-7-11 19:22 | 只看该作者

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.

zwjy

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发表于 2011-7-11 19:22 | 只看该作者

selling receiver swaption = call option on bond

If bond is callable, you sell the receiver swaption to remove the call. makes sense?

Zestt

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发表于 2011-7-11 19:23 | 只看该作者

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.

pennyless

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发表于 2011-7-11 19:23 | 只看该作者

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

cityboy

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发表于 2011-7-11 19:23 | 只看该作者

or what paraguay said..man that guy....dont go blowing the curve paraguay

aidebaobao

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发表于 2011-7-11 19:23 | 只看该作者

if add , buy reciever swaption
if remove ,sell

strikethree

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发表于 2011-7-11 19:23 | 只看该作者

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...

ll11

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发表于 2011-7-11 19:23 | 只看该作者

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.

lcai

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发表于 2011-7-11 19:23 | 只看该作者

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.