Question

Explain why a put option on a bond is conceptually the same as a call option on interest rates.

   Explain why a put option on a bond is conceptually the same as a call option on interest rates.

Fundamentals of Corporate Finance

Fundamentals of Corporate Finance

Stephen A. Ross;… 11th Edition

Chapter 23, Problem 7

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This put option provides the holder with the ability to protect against a decline in the bond's value. On the other hand, a call option on interest rates gives the holder the right, but not the obligation, to buy a bond at a predetermined price (strike price) Show more…

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Explain why a put option on a bond is conceptually the same as a call option on interest rates.

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