Dear all,
2 questions regarding fixed income.
Question 1:I understand from Schwesers Notes that there is a call feature attached to step-up bond. Can I say that step-up bond is a call option with step-up bond as the underlying asset?
Question 2: I tried my best to comprehend what has been written in explaining eurobond but to no avail; can someone further simplify the explanations further?
Thank You.
Cheers,
Ernest
You could think of it that way.
A eurobond is a bond denominated in a currency other than that of the country in which it is issued.
If a bond were issued in the U.S. and denominated in anything other than USD (e.g., CAD, EUR, GBP, JPY, AUD, and so on), it would be a eurobond. If a bond were issued in the United Kingdom and denominated in anything other than GBP (e.g., CAD, EUR, USD, JPY, AUD, and so on), it would be a eurobond.
And so on.
Some eurobonds are named for the currency in which they are denominated. A eurobond denominated in USD (issued outside the U.S.) is known as a eurodollar bond. A eurobond denominated in yen (issued outside Japan) is known as a euroyen bond. And so on.
You’re welcome.
doubts cleared. awesome and thanks.
A clarification for the step-up bond: the call option is owned by the issuer. The issuer can think of it as owning a call option with a step-up bond (on which they’re paying) as the underlying; the bondholder can think of it as being short a call option with a step-up bond that they own as the underlying.