New Arb Yield Regs for Premium Callable Bonds
By Jon Sidman
Oct 3, 2016, 08:30
The new regulations state that all yield-to-call bonds will be run to the call for the purpose of calculating the arbitrage yield. The test to identify yield-to-call bonds for arbitrage purposes has not changed.
The previous regulations required testing all permutations of yield-to-call bonds (to call vs to maturity) and selecting the combination that produced the lowest arbitrage yield.
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