2 options
Financial Instruments to Hedge Commodity Price Risk for Developing Countries / Yinqiu Lu, Salih Neftci.
- Format:
- Book
- Government document
- Author/Creator:
- Lu, Yinqiu.
- Series:
- IMF Working Papers; Working Paper ; No. 2008/006
- IMF Working Papers
- Language:
- English
- Subjects (All):
- Prices--Developing countries.
- Prices.
- Commercial products--Economic aspects--Developing countries.
- Commercial products.
- Revenue--Developing countries.
- Revenue.
- Options (Finance)--Developing countries.
- Options (Finance).
- Developing countries--Economic policy.
- Developing countries.
- Developing countries--Economic conditions.
- Physical Description:
- 1 online resource (22 p.)
- Edition:
- 1st ed.
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 2008.
- Language Note:
- English
- Summary:
- Many developing economies are heavily exposed to commodity markets, leaving them vulnerable to the vagaries of international commodity prices. This paper examines the use of commodity options-including plain vanilla, risk reversal, and barrier options-to hedge such risk. It then proposes the use of a new structured product-a sovereign Eurobond with an embedded option on a specific commodity price. By extracting commodity price risk out of the bond, such an instrument insulates the bond default risk from commodity price movements, allowing it to be marketed at a lower credit spread. The product is also designed to help developing countries establish a credit derivatives market, which would in turn enhance the marketability and liquidity of sovereign bonds.
- Contents:
- Contents; I. Introduction; II. Smooth fluctuations in Commodity Revenue Collections-Option Transactions; A. Plain Vanilla Options; Figures; 1. A Put Option Structure; B. Risk Reversals; Tables; 1. Prices of ATM Options; 2. Prices of 20 Percent OTM Options; 2. A Zero Premium Risk Reversal Structure; C. Barrier Option Structures; 3. Prices of the Up-and-Out Put Options: H=120; 3. A Knock-out Option; III. Smooth Borrowing Cost-A Structured Product; A. The Instrument; B. Intermediary; 4. The Structure of the New Instrument; C. Pricing; 5 The Involvement of Investment Bank as an Intermediary
- Notes:
- "January 2008."
- Includes bibliographical references (p. 19-20).
- Description based on print version record.
- ISBN:
- 9786612840395
- 9781462397181
- 1462397182
- 9781452794501
- 1452794502
- 9781451868685
- 1451868685
- 9781282840393
- 1282840398
- OCLC:
- 535146970
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