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Chapter 11: Analyzing Callable and Putable Bonds

In this section

  • Option-Adjusted Spread (OAS) Computation
    Understand Option-Adjusted Spread (OAS) for callable and putable bonds, how it's calculated, and its role in informed bond valuation and portfolio selection.
  • Effective Duration and One-Sided Durations
    Explore the nuances of effective duration for callable and putable bonds, and learn how one-sided durations capture asymmetric risks when yields move up or down.
  • Negative Convexity in Callable Bonds
    Explore how callable bonds exhibit negative convexity, why it matters for bond valuation, and practical strategies for managing portfolios with embedded call options.
  • Vignette Exercise: Calculating OAS and Effective Duration
    Learn how to determine Option-Adjusted Spread (OAS) for callable and putable bonds and measure effective duration using a scenario-driven, binomial tree approach. This step-by-step guide clarifies each phase of the calculation, highlights key exam tips, and wraps up with a practice quiz.
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Chapter 10: Bonds with Embedded Options—Introduction
Chapter 12: Convertible Bonds and Other Hybrids