Is there a Novelty Premiumon New Financial Instruments? the Argentine Experience with Gdp-Indexed Warrants
Luca Ricci (),
Marcos Chamon and
No 08/109, IMF Working Papers from International Monetary Fund
This paper examines the Argentine experience with GDP-indexed warrants in order to gauge the existence of a novelty premium on new financial instruments. It develops a Monte Carlo pricing exercise to calculate the expected net present value of payments, on the basis of various forecast assumptions. The results show that the residual premium paid by these warrants over standard bonds declined significantly by about 600 basis points between December 2005 and July 2007. This suggests that financial innovation may be associated with premia, which decay reasonably fast.
Keywords: Financial instruments; Economic models; discount rate, inflation, bonds, bond, cash flows, indexed bonds, discount bond, financial innovation, discount rates, monetary fund, moral hazard, financial markets, discounting, net present value, bond holders, present value, futures market, international financial markets, treasury bond, nominal exchange rate, stock market, indexed bond, stock market indices, international reserves, currency risk, financial assets, central bank, derivative securities, emerging market bonds, deposit freezes, derivative, conventional bonds, nominal interest rate, financial instability, financial fragility, financial market development, monetary policy, bond markets, stock of debt, financial market, denominated bonds, futures contracts, bond yields (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:imf:imfwpa:08/109
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in IMF Working Papers from International Monetary Fund
Address: International Monetary Fund, Washington, DC USA
Contact information at EDIRC.
Series data maintained by Jim Beardow ().