explain vol has on calls and puts bonus: rates go up, what happens to calls, puts?
vol increases poth call and puts IR go up, calls go up puts go DOWNTOWN!
Volatility is generally an option value enhancer. This means more volatility, higher cost of the option. For a callable bond, this means that the price will go down because it is the bond issuer who benefits from the increased value of the option. The inverse is true for puts, which benefit ths bondholder.
getterdone Wrote: ------------------------------------------------------- > vol increases poth call and puts > > IR go up, calls go up puts go DOWNTOWN! yup!