• This topic has 1 reply, 2 voices, and was last updated 6 days ago by Madhu Chandarasekaran, CFA.
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  • August 18, 2025 at 12:06 pm #9971
    Santo Ashok
    Participant
    Q. All things being equal if the shape of the yield curve changes from upward sloping to flattening, the value of the call option embedded in Bond 2 (callable bond) will most likely

    a. decrease

    b. r

    August 22, 2025 at 3:28 pm #9975
    Madhu Chandarasekaran, CFA
    Keymaster
    Yes, when curve flattens call option value will increase and the Callable bond value will decrease. Since the question is asking specifically about the call option alone (Not the bond) the value will
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