lehman brothers johnston callable securities-introduction雷曼兄弟约翰斯顿可赎回证券.pdfVIP

GovernmentBondResearch

CallableSecurities:

AnIntroduction

February1998

DouglasJohnston

•Callablesecuritiesofferanattractivewayforinvestorstocombinetheirviewsonmarket

direction,curveshape,therangeofrates,andimpliedvolatility.Weexaminetherisks

andrewardsofowningcallablesecuritiesandhighlightstrategiesthatcanbeemployed.

•Buyersofcallablesecurities,whohavesoldembeddedinterestrateoptions,mustcom-

parethecoupontheyarereceivingtoforwardratesimputedfromtheissuer’scredit

curve.Par-pricedsecuritiesdonotguaranteethattheoptionsareatthemoney.

•Weinvestigatetherelationshipbetweencurve-adjustednominalspreadsandmarket

level,andhighlightthecorrelation.Nominalspreads,adjustedforduration,tightenas

theembeddedoptionsmoveintooroutofthemoney.

•Bycontrastingthepartialdurationexposureofcallablesecuritiestocomparablebullets,

wedeterminetheyieldcurveexposureofdifferentlock-out/maturitystructures.Inaddi-

tiontobeingshortconvexity,callableshaveaflatteningbias.

•Premiumcallablesarebestsuitedforthebullishinvestorwhobelievesthatratesare

unlikelytorallytoofar.Discountcallablesarethterchoiceforsellingvolatilityina

limitedbearishenvironment.

Publications:M.Parker,D.Marion,V.Gladwin,A.DiTizio,C.Triggiani,B.Davenport,J.Doyle

Thisdocumentisforinformationpurposesonly.NopartofthisdocumentmaybereproducedinanymannerwithoutthewrittenpermissionofLehmanBrothersInc.Underno

circumstancesshoulditbeusedorconsideredasanoffertosellorasolici