这道题选项当中的upside指的什么?

问题如下：

3. A fall in interest rates would most likely result in:

选项：

a decrease in the effective duration of Bond #3.

Bond #3 having more upside potential than Bond #2.

a change in the effective convexity of Bond #3 from positive to negative.

解释：

B is correct.

A fall in interest rates results in a rise in bond values. For a callable bond such as Bond #2, the upside potential is capped because the issuer is more likely to call the bond. In contrast, the upside potential for a putable bond such as Bond #3 is uncapped. Thus, a fall in interest rates would result in a putable bond having more upside potential than an otherwise identical callable bond. Note that A is incorrect because the effective duration of a putable bond increases, not decreases, with a fall in interest rates—the bond is less likely to be put and thus behaves more like an option-free bond. C is also incorrect because the effective convexity of a putable bond is always positive. It is the effective convexity of a callable bond that will change from positive to negative if interest rates fall and the call option is near the money.