justin88

dlpicket Wrote:
-------------------------------------------------------
> I think you mean RISING interest environment, not
> steepening.
>
> If so, you know that bond values drop when rates
> go up.
>
> callable outperforms because the decline in value
> of your short call option offsets the decline in
> value of the bond.
>
> for putable its because you have the option to
> sell the bond back to the borrower at par, so even
> if the bond value goes below par, you can sell for
> the par amount, and reinvest at the higher rates.

got it, but how do you compare them with bullet structure?