Bond XYZ pays 5% annually
1 Delta Put expiring same time will cost me 1% of total Bond value.
Does it make sense to lever up on the bonds and buy enough puts to offset capital lost if XYZ fails to pay? It really acts like a CDO.
What are the risks I am taking? IF XYZ cant pay debt they go bankrupt shares will trade near 0.
1 Delta Put expiring same time will cost me 1% of total Bond value.
Does it make sense to lever up on the bonds and buy enough puts to offset capital lost if XYZ fails to pay? It really acts like a CDO.
What are the risks I am taking? IF XYZ cant pay debt they go bankrupt shares will trade near 0.
