When yield volatility increases, the value

问题单项选择题

When yield volatility increases, the values of a putable and a callable bond will: Callable bondPutable bond （） ①A. Increase Increase ②B. Decrease Decrease ③C. Decrease Increase

A．①

B．②

C．③

答案

参考答案：C

解析：

A callable bond is made up of a straight bond and a written call option. An increase in volatility increases the value of the call option and decreases the value of the callable bond. On the other hand, a putable bond is made up of an option-free (or straight) bond and a long put option. An increase in volatility increases the value of the put option and therefore increases the value of the putable bond.