What is the Bond variant?

The bond option is a financial derivative. It provides the holder the opportunity to buy or sell the amount of bond at a particular price. The possibility of Bond is like any other option, except that the underlying asset is a bond. Other options are derived from shares or exchange courses. The options are awarded as expected profit, which the holder receives until the expiry date. The issuing entity guarantees the holder of the payment of the set amount at the due date of the bond. Bonds differ from shares in that the bond buyer buys a debt tool and the company promises to repay this debt. On the other hand, stocks are stocks; Holder of shares own part of the profits of corporation. The shares do not have a due date and only some shares pay cash dividends, while others must be sold if the investor is to realize profits.

There are two types of options. The call is to sell and Put is the possibility to buy. The bond selection agreement determines the amount of bond that can be purchased or sold. AlsoAlthough the costs at which the transaction takes place: strike price. The holder is not obliged to exercise the possibility; If it is not profitable to buy or sell at a strike price, it may release expiry and lose the purchase price.

both puts and calls can be further divided into two classes: American and European. The US option can be applied at any point in expiry date or before the expiry date, and the European option can only be applied to the expiry date. American possibilities offer greater flexibility, thus providing more opportunities for profit. The American option is profitable if the price of the basic bond is favorable at any date before the possibility, while the European option is only profitable if it is favorable to a specific date. So the US options cost more.

The price of the bathtub is determined using the Black-Scholes method, as well as other prices of options. Analysts determine the expected value of profits that can be realized in different futureH States. These are weighed the probability of each condition and the resulting value is the theoretical price of the option.