Do put options become more valuable at higher yields because of the positive relationship between yields and interest rate risk? Any comments on the value of put options would be most welcome.
If you held a puttable bond paying 8% coupon would you be more likely to put it if prevailing rates were 4% or 12%?
DarienHacker Wrote: ------------------------------------------------------- > If you held a puttable bond paying 8% coupon would > you be more likely to put it if prevailing rates > were 4% or 12%? I’ll put the bond back to the issuing company if the Interest Rates (outside) are high. Since the bond could only give me only 8%, when the market potential of (interest rate) returns was 12%, so will put the bond back to the company and re-invest at a bigger-better-prevailing-rate!! Lemme know if I think correct? - Dinesh S
Mr. Lord, does that answer it?