A Framework for Pricing and Risk Management of Loans with Embedded Options

2011 ◽  
Author(s):  
Bernd Engelmann
Keyword(s):  
Risk Management ◽  
Embedded Options

scholarly journals Risk Management for Bonds with Embedded Options

Mathematics ◽  
2020 ◽  
Vol 8 (5) ◽  
pp. 790
Author(s):  
Antonio Díaz ◽  
Marta Tolentino
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Interest Rate Risk ◽  
Interest Rate Models ◽  
Management Measures ◽  
Interest Rate Risk Management ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Rate Change

This paper examines the behavior of the interest rate risk management measures for bonds with embedded options and studies factors it depends on. The contingent option exercise implies that both the pricing and the risk management of bonds requires modelling future interest rates. We use the Ho and Lee (HL) and Black, Derman, and Toy (BDT) consistent interest rate models. In addition, specific interest rate measures that consider the contingent cash-flow structure of these coupon-bearing bonds must be computed. In our empirical analysis, we obtained evidence that effective duration and effective convexity depend primarily on the level of the forward interest rate and volatility. In addition, the higher the interest rate change and the lower the volatility, the greater the differences in pricing of these bonds when using the HL or BDT models.

scholarly journals A dinâmica do spread ajustado por opções dos Brady bonds

2003 ◽  
Vol 1 (1) ◽  
pp. 89
Author(s):  
Franklin De O. Gonçalves ◽  
Luiz Otavio Calôba
Keyword(s):  
Risk Management ◽  
Term Structure ◽  
Sovereign Debt ◽  
Risk Measure ◽  
The Philippines ◽  
Pricing Model ◽  
Sovereign Risk ◽  
Substantial Fraction ◽  
Embedded Options ◽  
The U.S

Brady bond securities represent a substantial fraction of emerging markets countries internationally tradable sovereign debt. The credit risk spread above and beyond the U.S. treasury curve for these securities is usually large in size and volatility. Moreover, most Brady bonds carry embedded options that lead to the existence of an Option-Adjusted Spread, OAS, which increase their risk profiles. In this paper we present an empirical study of the dynamics of Brady bonds OAS using a heath, Jarrow and Morton term structure pricing model. The dynamics of the spread shows that the proper risk management and pricing of these securities require the consideration of volatility in addition to the magnitude of the sovereign risk spread. That is, the proper risk measure for these securities would be the pair (OAS, OAS Volatility). A study of implied default probabilities is also presented. Our analysis is illustrated with bonds from Brazil, Argentina, Mexico, Poland, Bulgaria and the Philippines.

Quality and Risk Management in the IVF Laboratory

2004 ◽  
Author(s):  
David Mortimer ◽  
Sharon T. Mortimer
Keyword(s):  
Risk Management
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