Pricing growth-indexed bonds

Pricing Growth-Indexed Bonds; Marcos Chamon and Paolo Mauro; IMF Working Paper 05/216; November 1, 2005

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Growth-indexed bonds have been suggested as a way of reducing...

Indexed Bonds With Mean-Reverting Risk Factors

In this paper, we focus on the value of inflation-indexed bonds in an extended short rate model, which is a specific case of the general framework provided by Jarrow and Yildirim (2003). In the model, we assume mean-reverting stochastic dynamics under the risk neutral measure for both the short interest rate and the instantaneous inflation rate. We define the zero-coupon inflation-indexed bond,...

Pricing Covered Bonds

Covered bonds1 have emerged as a potentially preferred funding vehicle from the credit crisis, and they were already a major part of many European financial systems. Although some prices are directly available on, for example Bloomberg2, there is no detailed examination of how covered bonds should be priced taking into account the features that make them attractive to investors: i.e. over-colla...

Pricing Emerging Market Corporate Bonds

On the Pricing of Inflation-Indexed Caps

We consider the problem of pricing inflation-linked caplets in a BlackScholes-type framework as well as in the presence of stochastic volatility. By using results on the pricing of forward starting options in Heston’s Model on stochastic volatility, we derive closed-form solutions for inflations caps which aim to receive smile-consistent option prices. Additionally we price options on the infla...