Choate elaborates on the different risk considerations he attributes to investment-grade bonds compared to high-yield bonds, “Relative to high-yield bonds, investment-grade bonds are more sensitive to interest rate changes and credit migration risk, resulting in credit spread volatility. High-yield bonds are not as sensitive to interest rates, and, given the potential for actual credit losses caused by default, monitoring outright market value of the position is more critical with high-yield bonds than with investment-grade bonds.”
Q. Are Choate’s comments regarding the risk considerations for investment-grade bonds compared to high-yield bonds most likely correct?
- No, he is incorrect with respect to investment-grade bonds.
- Yes.
- No, he is incorrect with respect to high-yield bonds.
Solution
B is correct. Investment-grade bonds have lower credit and default risks than high-yield bonds and are more sensitive to interest rate changes and credit migration, which cause credit spread volatility. The much higher credit loss rate experienced with high-yield bonds results in an emphasis on credit risk and the market value of the position to evaluate high-yield risk.
A and C are incorrect because Choate is correct with respect to both investment grade and high yield bonds.
不知道是不是我记错了，我记得高收益债券更应该关注违约，他的报价是用市值，选项说关注市值对高收益债券更重要，我觉得应该是违约风险更重要，而投资级债券更关注利率变化，报价是spread，投资级更关注credit migration吗，这一点我不记得了
