Study Session 16: Fixed Income: Analysis of Risk
i have a question regarding the pricing for callable bonds and i having some problems with it. usually wht they said is when the interst rate decreases the price of callable bond will increase and putable bond will decrease but my argument is tht the price of calllable bond cannot increase because as int rate will go down the issuer will redeem his bonds @ indenture call price and this will decrease the value of it so the other invester will not pay more than the stated call price or in other words it will have negative convexity.. m i correct
Hi, first of all, is it just me or is fixed income the most difficult topic in CFA level 1? Most of the time, I look at the question and feel lost immediately.
Can someone please assist me here. I have memozied all the rules of duration and they all make sense other than the following:
“Higher market yields means lower interest rate risk”
Can someone please explain why this is the case, I just can not get my head around why this is the case.
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