This paper sets forth some basic principles that could help debt managers in emerging market and other countries to plan and implement sovereign debt buyback and swap operations. It discusses the macroeconomic context in which buybacks and swaps are undertaken, the objectives of buybacks and...

This study explores the determinants of corporate bond spreads in emerging markets economies. Using a largely unexploited dataset, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, sovereign risk, and global...

The LIBOR Market Model (LMM or BGM) has become one of the most popular models for pricing interest rate products. It is commonly believed that Monte-Carlo simulation is the only viable method available for the LIBOR Market Model. In this article, however, we propose a lattice approach to price...

This paper presents some conventional and new measures of market, credit, and liquidity risks for government bonds. These measures are analyzed from the perspective of a sovereign's debt manager. In particular, it examines duration, convexity, M-square, skewness, kurtosis, and VaR statistics as...

In this article we discuss the fundamentals of pricing of the popular financial instruments. The basic point of our approach is to extend the present value benchmark concept. The present value valuation approach plays the similar role as The Newton Laws in the Classic Mechanics. Thus our primary...

A method of callable bonds pricing based on a binomial process is derived and the behaviour of this price when the yield curve changes is studied. The conclusion is that the effective duration corresponding to this pricing method may be a misguided characteristic, because the value of a callable...

Many debt issues contain an embedded call option that allows the issuer to redeem the bond at specified dates for a specified price. The issuer is typically required to provide advance notice of a decision to exercise this call option. The valuation of these contracts is an interesting numerical...

This paper presents a model for estimating the default risks implicit in the prices of callable corporate bonds. The model considers three essential ingredients in the pricing of callable corporate bonds: stochastic interest rate, default risk, and call provision. The stochastic interest rate is...

This paper considers the case for mortgage covered bonds as an alternative to the originate-to-distribute mortgage funding model. It argues that the economic incentives provided to market participants under the covered bonds model are less susceptible to moral hazard even while retaining the key...