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• VALUATION OF EMBEDDED OPTIONS IN NON-MARKETABLE CALLABLE BONDS: A NEW NUMERICAL APPROACH

  Publikacja

  • R. Skalický
  • M. Zinecker
  • A. P. Balcerzak
  • M. B. Pietrzak
  • E. Rogalska

  - Technological and Economic Development of Economy - Rok 2022

  The issue of how to price options embedded in callable bonds has attracted a lot of interest over the years. The usual bond valuation methods rely on yield curves, risk premium, and other parameters to estimate interest rates used in discounted cash flow calculations. The option to retire the bond is, however, neglected in the standard pricing models, causing a systematic overvaluation of callable bonds. In the event of a decline...

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