Bond Call Options

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analyst26

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When referring to the value of a bond call option, from whose perspective is the question. IE. "A bond call option gains value as...." Is it from the issuer or bondholder perspective? I seem to see questions asked from both perspectives?

Thanks in advance.
 
i think it wd from the investors perpective ....since it is the investors who wd buy/ sell the bonds
 
I would think investors as well. However, for each individual option, keep in mind who its benefiting (holder or issuer).
 
call option wd be beneficial to the issuer ..however it wd be the investors that wd be more concerned with how the call option wd affect the price of the bond
 
It's neither. A bond call option is a security just like a stock. It gains value as interest rates fall.
 
Correct, however this gain is for the issuer, not the holder. Because a call bond option increases risk for YTM.
 
analyst26 Wrote:
-------------------------------------------------------
> When referring to the value of a bond call option,
> from whose perspective is the question. IE. "A
> bond call option gains value as...." Is it from
> the issuer or bondholder perspective? I seem to
> see questions asked from both perspectives?
>
> Thanks in advance.



i think he was referring to an embedded call option ....and thts what my answer was based on ..
 
Oops. The embedded call. The question makes more sense now.
But I guess I still like my answer, but maybe not as much. The embedded call is also just a security (you can almost cash it in in the swaptions market).
 
as far as i know it's just the value of the option in general. if it's more valuable it's more valuable. it doesn't matter on perspective.
 
Dolomite, I think it does matter on perspective, because its more valuable to the issuer, not the holder.



Edited 1 time(s). Last edit at Saturday, May 6, 2006 at 12:01AM by CFAHouston.
 
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