Business Commons^™

Is The Put Option In U.S. Structured Bonds Good For Both Bondholders And Stockholders?, Manish Tewari, Pradipkumar Ramanlal

Manish Tewari

The recent financial crisis has brought into spotlight various financially engineered products, their design parameters, and the impact of these design parameters on the bondholders and the common stockholders. We analyze the common stock performance of 134 firms issuing the callable-puttable bonds, a structured derivative security, issued between 1977 and 2005. We focus our study on the common stock performance of the issuing firms around the issue date and the put date. We use the Fama French (1993) four factor regression model to estimate the common stock performance of the issuing firms two years before and after the issue and …