Is There a Novelty Premium on New Financial Instruments? The Argentine Experience with GDP-Indexed Warrants
IMF Working Papers, April 1, 2008
Source details
- Canonical URL
- Is There a Novelty Premium on New Financial Instruments? The Argentine Experience with GDP-Indexed Warrants
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Bibliographic details
- Authors: Luca A Ricci, Marcos Chamon, Alejo Costa
- Published: April 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869699.001
Authors and publication
- Luca A Ricci, Marcos Chamon, Alejo Costa
- April 1, 2008
- IMF Working Papers; Working Paper No. 2008/109
- Volume: 2008; Issue: 109; Pages: 40
- DOI: https://doi.org/10.5089/9781451869699.001
- Stock No: WPIEA2008109
- ISBN: 9781451869699
- ISSN: 1018-5941
Research question and scope
- Examines the Argentine experience with GDP-indexed warrants to gauge the existence of a novelty premium on new financial instruments.
- Focus on comparing residual premia paid by GDP-indexed warrants relative to standard bonds.
Methodology
- Develops a Monte Carlo pricing exercise to calculate the expected net present value of payments.
- Applies various forecast assumptions in the pricing exercise.
Key findings
- The residual premium paid by these warrants over standard bonds declined significantly by about 600 basis points between December 2005 and July 2007.
- The evidence suggests that financial innovation may be associated with premia, which decay reasonably fast.
Subject classification and keywords
- Subject: Currencies, Discount rates, Exchange rates, Inflation, Securities
- Keywords: discount rate, GDP warrant, U.S. dollar, unit of currency, WP
Document identifiers and access
- Format available: PDF (Download PDF indicated on landing page)
- Additional access and citation formats referenced on the source page.
Source: IMF Working Paper landing page for "Is There a Novelty Premium on New Financial Instruments? The Argentine Experience with GDP-Indexed Warrants".
Content in this bundle
- 1. Main Economic Indicators