Callable Bond Pricing
Free SOA Exam FM (Financial Mathematics) lesson in Bonds. 9 min read, ~1,327 words.
Worst-case pricing: over all call dates. Premium bond ( ): worst case = earliest call. Discount bond ( ): worst case = maturity. Variable call schedule: compute, compare each call price to it. Par bond callable at par: price = par regardless of call date.
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 4c
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