52a: Currency option bonds

CFA Level I Fixed Income
#1

The book states that a currency option bond gives the bondholer a choice between two currencies that they can receive bond payments in.

  1. When they say “payments”, do they mean coupon payments, or the repayment of principal (par value), or both?

  2. Can an investor change his mind mid-stream? Let’s say you have a 5-year bond that pays either in Yen or USD. Can you pick USD for 2 years, then request payment in Japanese Yen for the 3rd year when the Yen is really strong?

#2

From what I’ve read, it appears that the bondholder can make the choice at each payment date.

Apparently there are some such bonds which are investor-choice – as you’ve described – and others which are issuer-choice – where the issuer gets to decide on the currency at each payment date.