Likewise, one buys the put option if one believes that interest rates will rise.
[2] The latter approach is theoretically more correct, [3], although in practice the Black Model is more widely used for reasons of simplicity and speed.
For American- and Bermudan- styled options, where exercise is permitted prior to maturity, only the lattice-based approach is applicable.
[10] [11] [12][permanent dead link] For convertible and exchangeable bonds, a more sophisticated approach is to model the instrument as a "coupled system" comprising an equity component and a debt component, each with different default risks; see Lattice model (finance) § Hybrid securities.
European Put options on zero coupon bonds can be seen to be equivalent to suitable caplets, i.e. interest rate cap components, whereas call options can be seen to be equivalent to suitable floorlets, i.e. components of interest rate floors.