[DcifrThs]

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In this case it's 2, though 1 does happen, usually through specialized debt collection agencies. Corporate bonds do continue to trade through bankruptcy, with their value varying based on the expected outcome of the bankruptcy.

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thanks, clears that right up!

whats the relative price volatility of corporate debt after a chapter 11 files? i'd think it would rise significantly.

are there options on corporate debt? thats a good way to bet on bankruptcy i think if it were feasible, buy OTM puts on the debt if you think there is a larger than priced in chance the corporation will file chapter 11.

how would those options trade? i would assume that as the probability of bankruptcy becomes not insignificant, those options start to price in that extra volatility. but if you get in early enough, i would think that you would make a ton on the rise in implied volatility.

is this analysis correct? did i miss something?

are these types of bets available? do you know anyone or have you had experience w/ those types of situations?

sorry to just ask questions w/o serious research but if you know that would save me the trouble and i'd be much obliged.

thanks,
Barron