The objects of bond option transactions are mostly government bonds and bonds issued by government agencies. Treasury options are the right, but not the obligation, for a buyer to buy or sell a specific amount of a medium- or long-term bond. If the option is exercised, the seller of the option is obliged to deliver specific securities-physical delivery. Most OTC transactions are settled in cash based on the difference between the option exercise price and the spot market price on the settlement date.
Bond options
This entry lacks an information bar and an overview map . Supplementing related content makes the entry more complete and can be upgraded quickly. Come on!
The objects of bond option transactions are mostly government bonds and bonds issued by government agencies. Treasury options are the right, but not the obligation, for a buyer to buy or sell a specific number of medium and long-term bonds at a predetermined price. If the option is exercised, the seller of the option is obliged to deliver specific securities-physical delivery. Most OTC transactions are settled in cash based on the difference between the option exercise price and the spot market price on the settlement date.
Spot bond options provide a way to hedge against a specific security's reverse interest rate fluctuations, while also benefiting from favorable interest rate fluctuations.
