Put structures will provide investors with some protection in the event that interest rates rise sharply but not if the issuer has an unexpected credit event.
Isn’t this statement correct? The CFA topic test said this is wrong.
Put structures will provide investors with some protection in the event that interest rates rise sharply but not if the issuer has an unexpected credit event.
Isn’t this statement correct? The CFA topic test said this is wrong.
It’s incorrect.
If the bonds get downgraded, for example, the bondholder can exercise the put option.
Ah, the credit spread put option !