If an investor buys a 12-month credit spread put option on XYZ Ltd.'s bond with a strike

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If an investor buys a 12-month credit spread put option on XYZ Ltd.'s bond with a strike spread of 150bps for a premium of 55 bps, what is the appropriate course of action if XYZ Ltd's spread tightens to 50bps? Widens to 250bps? What is the breakeven level of trade?Illustrate your answers with the bond value movements. (5 marks)

Posted Date: May 19, 2024 01:11 PM

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If an investor buys a 12-month credit spread put option on XYZ Ltd.'s bond with a strike

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