Cover Image
Read Now

Is There a Novelty Premium on New Financial Instruments? The Argentine Experience with GDP-Indexed Warrants

This paper examines the Argentine experience with GDP-indexed warrants in order to gauge the existence of a novelty premium on new financial instruments. It develops a Monte Carlo pricing exercise to calculate the expected net present value of payments, on the basis of various forecast assumptions....

Full description

Bibliographic Details
Main Author: Ricci, Luca
Other Authors: Chamon, Marcos, Costa, Alejo
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Inflation
Government And The Monetary System
Payment Systems
Finance
Discount
Securities
Regimes
Monetary Economics
Deflation
Currency
General Financial Markets: General (includes Measurement And Data)
Money
Price Level
Foreign Exchange
Standards
Financial Instruments
Discount Rates
Banks And Banking
Investments: General
Currencies
Monetary Systems
Prices
Macroeconomics
Interest Rates: Determination, Term Structure, And Effects
Investment & Securities
Exchange Rates
Money And Monetary Policy
Argentina
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper examines the Argentine experience with GDP-indexed warrants in order to gauge the existence of a novelty premium on new financial instruments. It develops a Monte Carlo pricing exercise to calculate the expected net present value of payments, on the basis of various forecast assumptions. The results show that the residual premium paid by these warrants over standard bonds declined significantly by about 600 basis points between December 2005 and July 2007. This suggests that financial innovation may be associated with premia, which decay reasonably fast
Physical Description:40 pages
ISBN:9781451869699

Similar Items