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Pricing Floating-Rate Debt and Related Interest Rate Options

Most developing country debt is denominated in U.S. dollars and has a floating interest rate. The pricing of floating rate debt and related interest rate options are examined in this paper. Formulas for pricing ceilings and floors on floating rate debt are derived for several different models of int...

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Bibliographic Details
Main Author: Scott, Louis
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1990
Series:IMF Working Papers
Subjects:
Institutional Investors
Micro Finance Institutions
Industries: Financial Services
General Financial Markets: General (includes Measurement And Data)
Derivative Securities
International Economics
Debts, External
Exports And Imports
Debt Default
Depository Institutions
Loans
External Debt
Securities
Mortgages
Pension Funds
International Lending And Debt Problems
Investment & Securities
Non-bank Financial Institutions
Investments: Bonds
Bonds
Investments: Options
Finance
Options
Financial Institutions
Financial Instruments
Banks
Investments: General
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Most developing country debt is denominated in U.S. dollars and has a floating interest rate. The pricing of floating rate debt and related interest rate options are examined in this paper. Formulas for pricing ceilings and floors on floating rate debt are derived for several different models of interest rate variability. A framework for pricing risky debt and loan guarantees is presented, and the implications of the debtor country’s default option are analyzed. The elimination of large principal repayments, by collateralizing the principal, serves to reduce the debtor country’s incentive to use its default option
Physical Description:22 pages
ISBN:9781451842333

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