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How to Evaluate Gdp-Linked Warrants

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Author Info

  • Ken Miyajima

Abstract

Following a brief review of the recent history of GDP-linked instruments, this paper proposes a set of tools to examine the quantitative properties of GDP-linked warrants. It argues that trigger conditions should be clearly identifiable and payment amounts easily calculable. Based on a design that includes these features and historical data for the main EMBI countries, the paper provides an assessment of the issuer''s capacity to service GDP-linked warrants, comparing payments with tax revenues stemming from contemporaneous growth. The price of the GDP-linked warrants are then estimated from the point of view of both domestic and foreign investors.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/85.

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Length: 37
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/85

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Related research

Keywords: Economic models; Gross domestic product; Prices; Tax revenues; inflation; growth rates; real gdp; inflation rates; gdp growth; foreign currency; real interest rate; rates of inflation; growth assumptions; real value; growth rate; gdp growth rates; real interest rates; economic growth; nominal interest rate; gdp per capita; price inflation; gdp growth rate; monetary economics; nominal interest rates;

This paper has been announced in the following NEP Reports:

References

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  1. Paolo Mauro & Marcos Chamon, 2005. "Pricing Growth-Indexed Bonds," IMF Working Papers 05/216, International Monetary Fund.
  2. Stefano G. Athanasoulis & Robert J. Shiller, 1999. "World Income Components: Measuring and Exploiting Risk-Sharing Opportunities," Cowles Foundation Discussion Papers 1239, Cowles Foundation for Research in Economics, Yale University.
  3. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June.
  4. Eduardo Borensztein & Paolo Mauro, 2002. "Reviving the Case for GDP-Indexed Bonds," IMF Policy Discussion Papers 02/10, International Monetary Fund.
  5. Eduardo Borensztein & Olivier Jeanne & Paolo Mauro & Jeromin Zettelmeyer & Marcos Chamon, 2005. "Sovereign Debt Structure for Crisis Prevention," IMF Occasional Papers 237, International Monetary Fund.
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Cited by:
  1. Stavros A. Zenios, 2013. "The Cyprus Debt: Perfect Crisis and a Way Forward," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 7(1), pages 3-45, June.
  2. Biswa Nath Bhattacharyay, 2010. "Financing Asia’s Infrastructure : Modes of Development and Integration of Asian Financial Markets," Finance Working Papers 21883, East Asian Bureau of Economic Research.

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