zwjy

now you're just being obnoxious at best and giving false information to people not as strong in this material at worst.

nothing i said is in "obscure" markets, they happen every day in well functioning markets. These aren't one off events, in fact some are even the result of well functioning markets such as underwriting costs being a hurdle to call option exercise and high coupons vs ytc rates causing callable bonds to trade at premiums...

read the original question(s), then reread your ridiculous responses and tell me if you answered the question or not... the biggest problem people have passing these exams are making assumptions (like the dozen or so you did to justify your response, such as the market guessing there is a hedge behind (whatever that means), the existence of risk free puttable bonds, choosing continuous vs discrete options, low transaction costs, etc etc)... when CFA asks you what is 1+2 do you say 4 because I live in an alternate universe where 2 was not invented and all arithmetic questions must have even number answers???


For everyone else

"convexity of puttable bond - is it negative for high int, positive for low int?"

always positive, never negative

"By definition, the bond yield curve becomes a horizontal line at high interest rate, hence no convexity?"

close to horizontal but still has convexity.