Pricing the option adjust spread of Brazilian Eurobonds

Resumo

This paper presents results of a pricing system to compute the option adjusted spread ('DAS') of Eurobonds issued by Brazilian firms. The system computes the 'DAS' over US treasury rates taktng imo account the embedded options present on these bonds. These options can be calls ('callable bond'), puts ('putable bond') or combinations ('callable and putable bond'). The pricing model takes into account the evolution of the term structure along time, is compatible with the observable market term structure and is able to compute risk measures such as duration and convexity, and pricing and hedging of options on these bonds. Examples show the ejJects of the embedded options on the spread and risk measures as well as the ejJects on the spread due to variations on the volatility parameters ofthe short rate.

Ficha do documento

Tipo

Estudo

Ano

1997

Instituição

Escola de Pós-Graduação em Economia da FGV

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/12200

Temas

Economia

Palavras-chave

Derivatives pricingRisk managementTerm structure dynamicsIntertemporal modelsDynamic programmingObject oriented programmingEconomiaTaxas de juros