Pricing Growth-Indexed Bonds
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Summary:
Growth-indexed bonds have been suggested as a way of reducing the procyclicality of emerging-market countries' fiscal policies and the likelihood of costly debt crises. Investor attitude surveys suggest that pricing difficulties are seen as a considerable obstacle. In an effort to reduce such concerns, this article presents a simple way of pricing growth-indexed bonds. As a pleasant by-product, the analysis tracks the quantitative implications of an increase in the share of growth-indexed bonds in total debt, measuring the ensuing decline in the probability of default and the reduction in the spreads at which standard bonds can be issued.
Series:
Working Paper No. 05/216
Subject:
Emerging markets International financial markets Pricing policy
English
Publication Date:
November 1, 2005
ISBN/ISSN:
9781451862355/1018-5941
Stock No:
WPIEA2005216
Format:
Paper
Pages:
26
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