Hi,
Asking for some clarification re below please.
Rioja item set: why is this statement incorrect: Put structures provide investors some protection when interest rate rise but not if the issuer has a credit event. For me this is correct but probably im missing something.
Lehigh item set: Why was the 3.5 Maturity swap chosen please?
Thank you.
Edit: My previous reply didn’t answer your question, so I delete it, sorry for the inconvenience
Search the forum, there was a thread on this question before.
The conclusion is that if the credit event makes the company bankrupt then put option does not provide protection as company has no money to pay anything. But if the credit event only makes the spread wider (which is very likely) then put option can be exercised and provides some protection - assuming the company is still solvent and has funds to pay for the bond.