Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Put option is the right of the investor which he may exercise on the date at the put price given in the indenture. Normally, put price is in par value. When yield rises such that the bond's value falls below the put price, then investor will exercise the put option.
The value of putable bond is equal to the value of option-free bond plus the value of the put option. Therefore, the value of embedded option is equal to the difference between the value of a putable bond and the value of comparable option-free bond.
Figure 1: Price/Yield Relationship for a Putable Bond and an Option-Free Bond
Figure 1 shows that curve a - b' and a - a' shows the price/yield relationship of a putable bond and option-free bond respectively. When yield is lower than the coupon rate then price of the putable bond is same as option-free bond because the value of the put option is small. As interest rate increases the price of the putable bond declines but decrease in price is less when compared to that of option-free bond. For a given yield level, the difference between the price of putable bond and comparable option-free bond is the value of a put option.
What is the relationship between a bond's market price and its promised yield to maturity? Explain. A bond's market price relies on its yield to maturity abbreviated as YTM. Wh
How does the deposit-loan rate spread in the Eurodollar market compare with the deposit-loan rate spread in the domestic U.S. banking system? Why? Answer: The deposit-loan sprea
Weighted Aggregates Index In a weighted aggregates index, weights are assigned according to their significance and consequently the weighted index improves the accuracy of the
Value Index Numbers The value index number as described earlier is a combination index which combines price and quantity changes. Because of the difficulties experienced in pri
The personnel department of a firm is entrusted with the responsibility of recruitment, training and placement of the staff for the firm. The department is also required to critica
what is financial leverage
There are some misconceptions about securitization: Poor quality originators end up in securitizing their assets. A bank's best mortgage
Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the in
Distinguish between Lease and Hire Purchase. What are the circumstances in which each of the system of financing is better than other?
Basics of Convertible Bonds The provision of conversion in a corporate bond entitles the bondholder the right to convert the bond into a predetermined number of shares of commo
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd