8.14. Callable bonds appear to have market values that are determined as if the issuing corporation optimally
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8.14. Callable bonds appear to have market values that are determined as if the issuing corporation optimally exercises the call option implicit in the bond. You know, however, that these options tend to get exercised past the optimal point. Write up a nontechnical presentation for your boss, the portfolio manager, explaining why arbitrage exists and how to take advantage of it with this investment opportunity.
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Financial Markets And Corporate Strategy
ISBN: 9780071157612
2nd Edition
Authors: Mark Grinblatt, Sheridan Titman
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